Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — TRADE AND INDUSTRY

Dangerous Goods

Mr. Jack Thompson: To ask the Secretary of State for Trade and Industry what further steps he is taking to strengthen legislation against sellers of dangerous goods.

Mr. Gareth Wardell: To ask the Secretary of State for Trade and Industry what further steps he is taking to strengthen legislation against sellers of dangerous goods.

The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth): The introduction of the general safety requirement in part II of the Consumer Protection Act 1987 means that it is now a criminal offence to sell any consumer product that is not reasonably safe. That is supported by specific regulations and by a range of enforcement powers that enable action to be taken effectively and swiftly against unsafe consumer goods. I see no justification for further legislation in this area.

Mr. Thompson: Will the Minister take into account the fact that local authorities have had carefully to examine staffing levels in their trading standards departments simply as a result of the introduction of the poll tax? Will he consider at least changing part II of the Consumer Protection Act 1987 to extend the period of time for prosecutions from six months to about three years? There is great demand among local authorities for that change and it is important that it is considered. Will the Minister also consider legislation on the importation of radioactive goods such as smoke detectors, certain types of switchgear and watches?

Mr. Forth: The hon. Gentleman gives me an opportunity to pay tribute to the work done by trading standards departments up and down the land, which do excellent work on behalf of the consumer. Of course, it is for local authorities to decide their priorities. I hope that all local authorities will always give the highest priority to their duties under the Consumer Protection Act 1987 to give resources to the trading standards departments. I am confident that they will do so. As for radioactive material, if the hon. Gentleman will write to me, I shall consider the matter carefully in order to assess, apart from anything else, whether it is my responsibility. I should like to consider the matter in more detail.

Mr. Wardell: Will the Minister give three good reasons why he is not prepared to amend part II of the Consumer Protection Act 1987 in order to allow trading standards officers more time to prosecute sellers of goods that result in injury or put people's lives at risk?

Mr. Forth: I shall give the hon. Gentleman one reason. Although my Department has asked for them, I have not yet received positive and substantial reasons why we need such an extension of the time limit. I give the hon. Gentleman this undertaking. As and when anyone gives me real evidence that the six-months time limit is a real obstacle to the effective pursuit of prosecutions, I shall look at it positively. We have asked for such evidence and we are still waiting.

Mr Nicholas Bennett: Will my hon. Friend consider referring to the Office of Fair Trading a range of goods that have come on to the market in the past couple of years, which claim to be innocuous, are prettily packaged and have no price on them? The appear to be coming from an address in Walworth road.

Mr. Forth: If I can pick up the drift of what my hon. Friend is saying, I suspect that one of the problems with the products emerging from Walworth road is that we are still waiting for full disclosure of all the details, to say nothing of the fine print. When we see some of that, the goods may well be categorised as grotesquely unsafe to the public.

Mr. Nigel Griffiths: Does not the Minister realise that not only trading standards officers of local authorities but the prosecution service and the testing stations of his Department determine delays in bringing prosecutions against the sellers of dangerous goods? When trading standards officers throughout the country are telling the Minister that sellers of dangerous goods get away scot-free because of the six-month time limit on prosecutions, why has the Minister failed to review that serious loophole in our consumer protection law?

Mr. Forth: In his relatively brief tenure in office, the hon. Gentleman has made a speciality of making unsubstantiated statements from the Dispatch Box. I tell him in all generosity that I have had no such information or approaches from trading standards departments. When I receive detailed and substantial evidence that the time limit is causing the problem that he suggests, and as I have undertaken to his hon. Friend the Member for Gower (Mr. Wardell), I shall consider it positively, but I am awaiting that evidence. The hon. Gentleman might well prod trading standards departments to come forward more quickly.

Teesside Development Corporation

Mr. Holt: To ask the Secretary of State for Trade and Industry when he last met the chairman of Teesside development corporation to discuss development in Teesside.

The Minister for Industry (Mr. Douglas Hogg): I have not met Mr. Norman in his capacity as chairman of the Teesside development corporation, but I am well aware of TDC's achievements. I was pleased to see that unemployment in my hon. Friend's constituency has fallen


by 22·4 per cent. over the past 12 months. I am advised that the TDC has £1 million worth of factory space under construction.

Mr. Holt: I am grateful to my hon. and learned Friend for that reply and I hope that it will not be too long before he meets Mr. Norman. When he does, will he please convey to him the thanks of the people of Teesside for the work done by the TDC in regenerating and revitalising our area? If there is any drawback at all, it is that we still have to contend with Cleveland county council. Perhaps we can abolish that and extend the TDC to the whole area.

Mr. Hogg: I shall indeed bear in mind what my hon. Friend has said, and discuss with Mr. Norman the important fact that during the past two years, by the selective use of regional assistance, about 2,500 new jobs have been attracted into the Cleveland area. That is an important development for the whole region.

Space Research

Mr. Atkinson: To ask the Secretary of State for Trade and Industry if he will make a statement on United Kingdom participation in space research for peaceful purposes.

Mr. Douglas Hogg: The United Kingdom is successfully carrying out a range of civil space activities, principally through the programmes of the European Space Agency. The main emphasis of our programme is on space science and on Earth observation. Development of Earth observation services will open up new commercial opportunities and play a significant role in monitoring the global environment and climate.

Mr. Atkinson: In view of the negative vibes that we were giving out to the European Space Agency two years ago, may I thank my hon. and learned Friend for that encouraging reply? Is he aware of the various plans to develop a space plane—Hermes in France, Saenger in West Germany, the Orient Express in the United States and our own HOTOL project? Does he agree that it would be sensible to collaborate internationally on such an expensive project, and to include Japan and the Soviet Union if possible? Will he initiate international discussions along those lines?

Mr. Hogg: We do not have any intention of putting Government money into HOTOL. If it ever takes place, it is likely to be an enormously expensive project, and very few vehicles would be required. If there are industrial participants who are thinking in terms of it, I should certainly commend to those involved international co-operation of the sort suggested by my hon. Friend. I take this opportunity to emphasise the Government's commitment to the programmes sponsored by the European Space Agency.

Mr. Page: Does my hon. and learned Friend agree that the most profitable aspect of space science has been telecommunications, in which we have been enormously successful in the past? Is he concerned that we might be losing that lead? Is he fully convinced that we are giving all the support necessary to the new projects coming forward?

Mr. Hogg: That is an important question. The Government are trying to take on projects in space that are likely to give rise to the most useful programmes in the

foreseeable future. We have done well in telecommunications in space, and British industry leads the field in that. As a specific reply to my hon. Friend, he may know that we have just announced a commitment of another £32 million towards what is known as DRTM—the data relay technology mission. We shall be researching intercommunications between satellites and between mobile land satellites.

Steel Industry

Mr. John Hughes: To ask the Secretary of State for Trade and Industry if he will make a statement on the future of the steel industry in the United Kingdom.

Mrs. Margaret Ewing: To ask the Secretary of State for Trade and Industry if he will list the principal regular subjects of discussion at meetings between himself and the chairperson and board of British Steel plc on which he answers to Parliament.

Mr. Douglas Hogg: British Steel is now a private sector company free from Government control. Over the last 10 years there has been a transformation in the fortunes of British Steel, which is now one of the most successful and productive steel companies in the world. I am confident that that success will continue in the future.

Mr. Hughes: Does the Minister acknowledge that the product of the Government's suicidal economic policies, which have resulted in catastrophically high interest rates, is the loss of the jobs of thousands of workers in the steel industry in Scotland and Wales? Will he explain what steps he has taken to counteract that effect? Is he aware that British Steel has only 2 per cent. of the market share in the Common Market, in which demand is increasing at 3 per cent? What steps will he take to ensure that the British steel industry will meet that demand?

Mr. Hogg: I am afraid that the hon. Gentleman has not done credit to what is an important issue. The plain truth is that the fortunes of British Steel have been dramatically transformed in the past 10 years and it is now one of the most successful steel-making concerns in the whole of Europe. We should not forget that between 1975 and 1985 the subsidies to the steel industry, expressed in today's money, were £14,430 million. I should have thought that the House would be pleased to note that British Steel is now in profit.

Mrs. Ewing: This is an extremely important issue and it is clear that the Minister is not responding to the extreme anger that we feel in Scotland today about the despicable and disgraceful announcement by British Steel of the proposed closure of the hot strip mill at Ravenscraig next year. Why is not the Secretary of State for Scotland prepared to come along and sit on the Front Bench to hear the points that hon. Members are raising today? We are talking not just about the loss of 770 jobs directly but about the heart being torn out of the communities of central Scotland and about the core being removed from the Scottish economy.
When was this decision reached? Is it true that it was reached by the board in March of this year? When did the Department know about it? When did it discuss it with the Scottish Office? When will we have an opportunity to look at this in more detail?

Mr. Hogg: The hon. Lady is being less than candid with the House. She has complained about the absence of my right hon. and learned Friend the Secretary of State for Scotland; she knows perfectly well that my hon. Friend the Minister of State, Scottish Office is on the Front Bench, and that there is a private notice question down for answer at 3.30 pm, to which my right hon. and learned Friend the Secretary of State will be responding. So it was less than honest of the hon. Lady to pose her question in the way that she did.

Sir William Clark: Does my hon. and learned Friend agree that the success of the steel industry is proof positive that privatisation is much better than Government control?

Mr. Hogg: Absolutely; my hon. Friend is entirely right. During the 1970s the British steel industry was virtually destroyed by the Labour party policies that were then in place. Since then, there has been a dramatic upturn in the fortunes of British Steel, which came from a considered decision to let its managers manage their business in accordance with commercial criteria.

Mr. Oppenheim: Can there he any better example of socialist economic mismanagement than the performance of British Steel in the 1970s? Is not it true that in the 1970s the Labour Government pumped huge amounts of state subsidies into British Steel, which merely encouraged it to build up huge and unnecessary surplus capacity? It was strike-bound most of the time; it was unproductive; and at one point it was losing £1 million a day. Contrast that with today, when British Steel is one of the most profitable and productive steel companies in the world, with one of the best-paid work forces in Britain.

Mr. Hogg: My hon. Friend is entirely right. He referred to losses, and the House will wish to know that in the period 1979ߝ80 British Steel lost—in today's money—£3,359 million. In the same period the United Kingdom steel industry was, I regret to say, at the bottom of the output league: output per man was about 160 tonnes, whereas we are now third in the ranking with output per man at about 347 tonnes.

Dr. Reid: On this of all days, the fact that the Secretary of State for Trade and Industry is not at the Dispatch Box now is a shameful disgrace. He cuts an ever more irrelevant and pathetic figure. Does not the Minister begin to understand the feelings of bitterness and betrayal in the Motherwell area? He will be the target of those feelings, and deservedly so. Why did not he heed our warnings about privatisation? Why did he go ahead despite those warnings and why has not he lifted as much as a little finger to argue for investment at Ravenscraig? Will he have the guts to admit that his complacency was wrong and give a guarantee that he will stand alongside Opposition Members who will fight to the end to reverse the decision taken this morning by British Steel?

Mr. Hogg: The hon. Gentleman's observations simply prove that the Labour party has learned nothing at all about the proper approach to industrial policy. I repeat to the House that between 1975 and 1985 subsidies to the British steel industry, in today's money, amounted to £14,430 million. That is a disgrace. The industry is now profitable and its output is among the most remarkable in Europe. That is a tribute to the process of privatisation.

Mr. Dickens: Does my hon. and learned Friend agree that there are as many people working for British Steel today as there were 10 years ago? The British taxpayer was putting £600 million a year into British Steel. Today it is making £800 million profit.

Mr. Hogg: My hon. Friend is entirely right to draw attention to the radically changed productivity record of British Steel. He is also entirely right when he says that what was a catastrophically loss-making industry is now profitable. We should be proud of that and not try to put back in place policies pursued by the Labour party that led to disaster.

Mr. Gordon Brown: Will the Minister explain how privatisation has ensured the future of Ravenscraig and the strip plant? Is not he ashamed to come before the House as the "do nothing" Minister who has simply walked away from his responsibilities to the steel industry? Will he confirm that the Secretary of State has not only refused to answer questions today but has failed to meet British Steel? When the chief executive of British Steel came to the Department of Trade and Industry yesterday no Minister bothered to meet him and he was met by only a few officials. Will the Minister now meet British Steel and demand that it explains itself? Will he call for the additional long-term investment that is now needed for a long-term and viable future for the steel industry in Scotland, England and Wales? How much more of Britain's manufacturing industry will he betray before he ends this dereliction of duty?

Mr. Hogg: I must say to the hon. Gentleman that I find his ranting profoundly depressing. Clearly, he has not understood or has not listened to any of the facts that I have given to the House. When the Labour Government were last in power the steel industry made a loss, in today's money of £3,359 million. That was a result of the type of policy—if the hon. Gentleman has one—that he is now calling for—that is, massive intervention. As the hon. Gentleman well knows, my right hon. and learned Friend the Secretary of State for Scotland has been in the far east selling Britain most effectively as a manufacturing country for inward investment. He also knows that my right hon. and learned Friend is coming to respond to a private notice question. The hon. Gentleman is a Scottish Member, so he would be the first to complain if some other Minister were first to make such a response.

Consumer Capital Goods

Mr. Stern: To ask the Secretary of State for Trade and Industry what proposals he intends to bring forward to amend the law relating to the protection of purchasers of consumer capital goods.

Mr. Forth: The Government have announced their support for the Law Commission's recommendations to amend legislation on the sale and supply of goods and services. Those recommendations cover other transactions within the ambit of that legislation and not only those for "consumer capital goods". The private Member's Bill introduced by the hon. Member for Clwyd, South-West (Mr. Jones) would give legislative effect to those proposals.

Mr. Stern: Will not that private Member's Bill, which is at the moment in the other place, be a useful addition to the body of law if it is passed in its present form? However,


once that Bill is passed, is not there still scope for a fresh look at protection of the purchasers of consumer capital goods?

Mr. Forth: My hon. Friend is correct. In the shape in which it left the House and went to the other place, the private Member's Bill has the Government's full support, and I hope that it ends up on the statute book, because it would add considerably and significantly to consumer protection. My hon. Friend is also correct to say that I undertook that when the Bill is resolved one way or another by both Houses of Parliament, it will be appropriate for me and the Department to look at consumer guarantees—something on which my hon. Friend has pressed me on a number of occasions—to see whether it is appropriate to consider further legislation in that sector. I have undertaken to do that in the past and I gladly do so again.

Mr. Ashdown: While we are on the subject of consumer protection, is the Minister aware of the disgraceful failure of the Insurance Brokers Registration Council to protect the interests of consumers in the Wessex Trust affair, in which so many have lost, often their life savings? Is he further aware that the IBRC has lost applications for grants and sought to discourage eligible applications? If he says that he cannot and will not intervene to ensure that the IBRC fulfils its obligations, will he at least express his disapproval of its actions?

Mr. Forth: Far be it from me to invade your territory, Mr. Speaker, but if the right hon. Gentleman spent more time in the House, he would realise that he was asking supplementary questions not only on a subject which has nothing to do with the main question, but on something which has nothing to do with my responsibilities. It is entirely a matter for my hon. Friend the Parliamentary Under-Secretary of State for Corporate Affairs. However, if the right hon. Gentleman wishes to write to the correct Minister in my Department, he will get an answer from my hon. Friend.

EC Trade

Mr. Dunnachie: To ask the Secretary of State for Trade and Industry when he will next meet his counterparts in the European Commission to discuss United Kingdom trade with the European Community.

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. John Redwood): My right hon. Friend and I regularly meet European Commissioners and discuss with them a wide range of subjects.

Mr. Dunnachie: Is the Minister aware that imports to the United Kingdom from the EEC totalled some £2·7 billion in the 1970s and that in 1989, the figure had risen to £63·5 billion? In the light of that, will he outline his plans to improve the figure?

Mr. Redwood: The hon. Gentleman should also note that there has been a big increase in our exports to the European Community because we are trading much more widely with our European partners than we were in 1970. The House should recognise that, since 1983, the ratio between our exports and imports in manufactured goods to the European Community has been improving. That is a direct result of the economic policies pursued by the

Government, which have led to a massive increase in investment and productivity and an improvement in our manufacturing performance. I dread to think what would happen if we took the advice of Labour Members and adopted some of the policies emerging from the Labour party's latest policy review. On page 131 of his book, the hon. Member for Dunfermline, East (Mr. Brown) recommends a major increase in corporate and investment taxation. That would be a good way to reverse the encouraging trend in the ratio between exports and imports in manufatured goods to Europe, which has been taking place since 1983.

Sir Hal Miller: When the Minister meets his counterparts, will he tell them that the motor trade has shown a positive improvement, and raise with them the question of the barriers being erected against cars made by British workers in British plants, using money supplied by British banks, albeit for a Japanese company? Will he do his best to ensure that those artificial barriers to trade are removed, so that we can complete the single market, and compete fairly, and that that takes place long before we move on to further measures of European unity?

Mr. Redwood: My hon. Friend has done a great deal for the British motor industry and I am sure that he will be pleased to know that my right hon. Friend the Secretary of State has carried the argument strongly into the counsels of our European partners. He has made it clear that cars produced in Britain, by whatever company under whatever ownership pattern, are British cars and therefore European cars and should circulate freely within the Common Market. That remains our position, and we have every confidence that our partners will accept it. My hon. Friend can rest assured that the Government will fight strongly for that right. We are proud of the revival in the British motor car manufacturing industry by new investors and existing investors who are already in this country. The cars are British. Opposition Members love to knock these investments, but they should welcome them and recognise the great contribution that British skills and money are making to the investments.

Mr. Skinner: What about the Italian fireplaces?

Ms. Quin: rose—

Mr. Cryer: What about a few more Back Benchers?

Mr. Speaker: Order. We cannot have this background noise. It is extremely disruptive and it does not help our debates.

Ms. Quin: From the Minister's earlier reply it would be difficult for many people to realise that we have a huge trade deficit with the EEC. As we do have such a deficit, why are the Government cutting export promotion research?

Mr. Redwood: The Government offer a range of assistance to stimulate exports in the best way that is suitable for exporters. The DTI is happy to offer that advice and assistance through its successful export promotion.
The proof of the pudding is in the eating. Our exports are improving relative to our imports, and the Government's macro-economic policies are an important part of the policy to bring together the two lines between imports and exports. There is nothing on offer from the


Opposition. Their latest policy review is a sham and a pipe dream of the worst sort. There are no policies within it for controlling inflation or excess demand. The Government have put forward the necessary policies, and they will work.

Regional Assistance, Shropshire

Mr. Gill: To ask the Secretary of State for Trade and Industry whether he will consider extending regional selective assistance to south Shropshire.

Mr. Douglas Hogg: Regional selective assistance is available to those parts of south Shropshire that have been designated as intermediate areas under the Industrial Development Act 1982. I have no plans to extend assisted area status to other parts of south Shropshire.

Mr. Gill: My hon. and learned Friend will be aware of the £14 million of taxpayers' money which is being made available to the Unitgate company for a poultry processing plant at Scunthorpe. He will further be aware of that company's declared intention to make 500 employees redundant at its plant at Craven Arms in my constituency. In refusing to make grants universally available or to scrap the system altogether, is my hon. and learned Friend aware of the serious competitive distortions that are caused within industries, leading inevitably to the transfer of jobs from one area to another? In the light of the example that I have given, will the Government review their policy?

Mr. Hogg: My hon. Friend referred to jobs in his constituency. I am sure that he is as pleased as I am to note that during the past 12 months unemployment in his constituency has fallen by 23·7 per cent. I am aware of my hon. Friend's concern about the particular application to which he has drawn attention. Indeed, he has seen my right hon. Friend the Secretary of State to discuss it. There is, however, a misunderstanding. The scheme to which my hon. Friend referred at Scunthorpe involves a chicken plant, for which RSA was provided. The facility in his constituency is a turkey concern. They have feathers in common, but nothing else. I am satisfied that RSA is being applied sensibly and usefully.

Car Production

Mr. Boswell: To ask the Secretary of State for Trade and Industry whether he will list the numbers of cars produced in the United Kingdom over the last five years.

Mr. Squire: To ask the Secretary of State for Trade and Industry whether he will list the numbers of cars produced in the United Kingdom over the last five years.

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Nicholas Ridley): To the nearest thousand, 1,048,000 cars were produced in 1985; 1,019,000 in 1986; 1,143,000 in 1987; 1,227,000 in 1988 and 1,299,000 in 1989.

Mr. Boswell: I thank my right hon. Friend for that answer and recognise the improving trend that it shows. However, does he agree that the figures still show an overlarge deficit in that sector? With the new investment from both Japanese and home-grown companies, does he think that the figures will improve still further in the next five years, with consequential benefits both for the balance of trade and for British steel production?

Mr. Ridley: My hon. Friend is right. We have reversed the disastrous effects of Labour's policies in the late 1970s, when the production of cars fell from 1·5 million to fewer than 1 million per year. With present investments in prospect, the Society of Motor Manufacturers and Traders estimates that 2 million units will be produced per annum by the mid- 1990s. That will more than twice overtake the position that we inherited. It is a remarkable demonstration of the success of the Government's policies compared with those that the Opposition are still peddling.

Mr. Squire: Does my right hon. Friend agree that while those figures confirm that Opposition claims of a collapse of manufacturing industry are not borne out in the motor industry in any way, shape or form, it remains critical in such a multinational industry that wages and productivity remain competitive so that we can be attractive to investment, not just now but over the next decade?

Mr. Ridley: My hon. Friend is right—productivity is the key to competitive success and to improving wages. It may interest the House to know that Rover produced six cars per man-year in 1979, but in 1989 it produced 20 cars per man-year. That is the sort of level which, although still not adequate, shows the extreme necessity of higher productivity in British industry, and which has been achieved in that case. That is necessary if we are to regain market shares throughout the world.

Mr. Harry Ewing: Will the Secretary of State consider both aspects of the manufacture of new cars, the other aspect being the sale of new cars? Will he discuss with manufacturers the type of advertising material that places heavy emphasis on the very high top speeds that the cars can achieve in a short time? Is he aware of the number of recent tragic accidents in which youngsters have been killed trying to reach the high top speeds that manufacturers advertise for their vehicles?

Mr. Ridley: The hon. Gentleman may be interested to know that last year 991,000 cars built in British factories were sold to United Kingdom customers in the home market. That is the highest for any year since 1973. If customers want high acceleration, manufacturers must provide it. I remind the hon. Gentleman that the law of the land sets speed limits and they are enforced by the police. He is right to suggest that people should not break the law of the land and cause accidents. However, I am not responsible for the traffic laws, and it is necessary for manufacturers to produce what the customers want.

Mr. Win Griffiths: Does the Secretary of State intend to provide any evidence to the European Commission inquiry into why car prices in Britain are so much higher than in the European Community?

Mr. Ridley: As the hon. Gentleman knows, the matter has been referred to the Monopolies and Mergers Commission for an in-depth study. In view of my statutory position in relation to the MMC, it would be wrong of me to make any comment or to refer any evidence myself. The MMC's duty is to collect such evidence as it thinks necessary to pursue its inquiries.

Mr. Grylls: Does my right hon. Friend agree that the increase in the production of cars in Britain is very much attendant on their having free entry to the continental market? Although he has taken a robust line on the matter


with his colleagues, can he tell us when the problem will be resolved and when cars from plants located in Britain will be allowed freely into countries such as France?

Mr. Ridley: I agree entirely with my hon. Friend's sentiments. At present, cars manufactured in Britain, by whatever company and whoever owns it, are allowed free circulation into the European Community. We intend to maintain that position and I believe that under the treaty of Rome it should be maintained. A new question has been raised by some member states in relation to the regime for the import of Japanese cars after 1992. I make it absolutely clear that the Government are adamant that there should be no change in the position of what are called transplants. They will continue to maintain free entry into the market, without there being any effects on any other matter.

Mr. Henderson: The Secretary of State will know that recent proposals from the Commission identify cars produced in Sunderland, potentially in Derby and also in Swindon, as cars which, during the transitional period, would be counted as part of the Japanese quota. I understand the strong words that the Secretary of State expressed this week to the Japanese Government. Can he tell the House how he intends to ensure that cars made in Sunderland, Derby and Swindon will be classified as British? Does he accept that if he is to get majority EC support for the proposal he will inevitably have to talk to the French, the Italians and the Spanish about extending the time limit on the transitional period?

Mr. Ridley: I did not use strong words on the issue to the Japanese, but I certainly did to the Commission, and to the Spaniards, the French and the Italians. They are the ones who received the strong words, to the effect that there will be no question but that these cars will have the free circulation to which they are entitled under the treaty of Rome. I believe that the matter will be resolved soon and entirely in our favour.

Balance of Trade (Japan)

Mrs. Gorman: To ask the Secretary of State for Trade and Industry what recent representations he has received regarding the United Kingdom's balance of trade with Japan.

Mr. Redwood: The Department of Trade and Industry receives a number of representations from time to time on the matter. My hon. Friend may like to know that in the most recent year our exports to Japan have risen by 30 per cent. and imports by only 9 per cent. We hope that that welcome improvement in trend will continue.

Mrs. Gorman: I thank my hon. Friend for his reply. I know that he understands the free market and how it works. Does he agree that our constant worry about the balance of trade deficit with countries such as Japan is about as important as worrying about the balance of trade between Birmingham and Edinburgh, or between Bradford and Bruges? When British people voluntarily buy goods that they want, what they part with is money—which the foreigners cannot eat or stuff into their futons, and which is subsequently reinvested in Britain. Does he agree that what we should worry about is abolishing obstacles to free trade both here and abroad?

Mr. Redwood: In her usual colourful way, my hon. Friend has made a good economic point. She is right that the party to which she and I belong does not wish to see obstacles placed in the way of people buying the things that they wish to buy. I wish that we could say the same of the Labour party, which wants credit controls to stop people buying Japanese videos, televisions and similar products. Where my hon. Friend and I believe that it is important to make strong representations to our trading partners is if they fall short of the high standards of free trade that we all wish to see worldwide. There are occasions when it is necessary to make strong representations. My right hon. Friend the Secretary of State has just returned from a strenuous trip to Japan, where he has been making some of the points that British business wanted us to make. I should add that Japanese trade is much smoother in that respect than trade with some other countries.

Dr. Kim Howells: Does the Minister consider, in the light of his previous answer, that an additional reason for our comparatively low sales of cars and other goods to Japan may be that the Government have done their best to gut innovative research and development in this country, and that we are simply not keeping up with trends and developments in many important areas?

Mr. Redwood: I am afraid that the hon. Gentleman is badly informed. The Japanese are having to set up car plants in this country because they also wish to set up design centres here, which will draw heavily upon the skills of British designers and engineers for the next generation of Japanese cars for the European market, with a strong skill input from people in this country. He also ignores the point of my reply to the previous question— that our export performance with Japan is improving because customers recognise that we offer goods of quality with substantial skill and design content and they are buying more of our goods day by day.

Mr. Dunn: Surely the truth of the matter is that we do not enjoy free and fair trade with the empire of Japan. Is not it a fact that Japanese goods find it easy to gain access to markets in this country whereas our exports find it immensely difficulty to gain access to Japanese markets? Should not we tell the Japanese Government that unless they mend their ways in terms of economic warfare we shall declare war?

Mr. Redwood: My hon. Friend should note that the average tariff on industrial products imported into Japan is substantially lower than that on industrial products imported into the European Community. There have been some isolated sectoral problems with Japan. We are pleased with the progress made, for example, with whisky as exports are growing rapidly as a result of changes made by the Japanese Government. There are problems in the footwear and leather sector, which my right hon. Friend the Secretary of State has drawn to the attention of our Japanese opposite numbers. The House should recognise that Japan is not a bad trading partner, that we are pleased with the way trade is developing, we give a warm welcome to Japanese investors here, and it would be wrong to jeopardise that position with ill-chosen words.

Dr. Moonie: Will the Minister tell the House exactly what are the figures for the balance of our trade with Japan over the past year?

Mr. Redwood: The balance of trade with Japan in 1989 was minus £4·8 billion.

Car Exports (Japan)

Mr. Neil Hamilton: To ask the Secretary of State for Trade and Industry whether he will list the levels of United Kingdom exports of cars to Japan in (a) 1988 and (b) 1989.

Mr. Redwood: My hon. Friend will be pleased to know that in 1988 we exported 8,099 cars to Japan, worth £65 million, and in 1989 we exported 15,500 cars worth £126 million, which makes the point that the Opposition do not want to understand—that the position is improving rapidly and the improvement is very welcome.

Mr. Hamilton: Does my hon. Friend agree that the growing strength of the British car industry is entirely due to the tremendous changes that have been brought about in industrial relations in that industry as a result of legislation introduced during the past 12 years, all of which was opposed by Labour Members, and that the jobs of British car workers are protected by the increasing export performance of British car companies to countries such as Japan? Will he confirm that Japan is our ninth best export market?

Mr. Redwood: My hon. Friend is right on both counts. Of course, the improved industrial relations record is a most important feature. It is a shame that even now the Labour party cannot agree on the importance of those reforms and totally opposes some of them in the political advice given to the Government in the Labour party's latest policy review— the fourth or fifth review, I have lost count of how many there have been.
The House may also like to know how well trade in motor cars with Japan went in the 1970s, when the Opposition had a chance to put into practice the policies that they are still preaching. In the worst year, we exported 891 cars compared with 15,500 last year. In the Labour Government's best year, to give them credit, the figure reached 3,393. Those were the years when the British motor industry was dogged by high taxation, high borrowing and bad labour relations —the same recipe as the Labour party's new policy review.

Mr. Roy Hughes: How do the puny levels of British car exports to Japan compare with the levels of British car exports to the Common Market, and how do our actual exports compare with the radiant forecasts made by Lord Stokes when he was chairman of British Leyland way back in 1972? Can the Minister also tell us something about the import of cars into Britain from the Common Market?

Mr. Redwood: The hon. Gentleman's question is outside the terms of the main question. We import more cars than we export to member states of the European Community, and the total trade in cars is much larger than that with Japan. The figures are in the Library if the hon. Gentleman cares to look them up, or he can table an appropriate question. The point that he is trying to make misses the dynamics of the British motor car industry. As my right hon. Friend the Secretary of State said, the industry went through a bad time in the 1970s, improved in the 1980s and will have a splendid time in the 1990s

—the decade of manufacturing revival under a Conservative Government with most welcome inward investment from several overseas countries.

Mr. Roger King: My hon. Friend will probably know that the mini-car produced by Rover Group has long been a good seller in Japan—it sells in ever greater quantities each and every year —but is he also aware that Nissan in Sunderland will be producing a unique five-door version to succeed the Bluebird which will be exported exclusively to Japan? Japanese transplant factories are thus producing goods for their own home market.

Mr. Redwood: Indeed. I am grateful to my hon. Friend for bringing his expertise to bear on the subject. He is an expert on the motor industry and his support and encouragement for it are most welcome. I am even more pleased to note that he does so much to promote exports to Japan without receiving any commission for it.

West Midlands

Mr. Bellingham: To ask the Secretary of State for Trade and Industry what recent representations he has received from engineering firms in the west midlands.

Mr. Douglas Hogg: My right hon. Friend the Secretary of State regularly receives representations on a range of issues from engineering firms operating in the west midlands.

Mr. Bellingham: Is my hon. and learned Friend aware that many companies in King's Lynn and west Norfolk have done well as subcontractors for some of the great firms in the west midlands and, as a result, unemployment has come down sharply? What has happened to the employment picture in the west midlands over the past two years?

Mr. Hogg: Most people would say that that was a planted question, but it is not. However, the answer is extremely cheering. I chanced to have an analysis done of west midlands constituencies and I will share the results with the House. Between March 1989 and March 1990 a sample result showed unemployment in Sutton Coldfield down 29 per cent., in Solihull down 28 per cent., in Halesowen down 26 per cent., in Dudley, West down 21 per cent., in Dudley, East down 19 per cent., in Birmingham, Yardley down 19 per cent., in Birmingham, Hodge Hill down 21 per cent., in Birmingham, Hall Green down 18 per cent. and in Aldridge-Brownhills down 18 per cent.—dramatic falls in unemployment right across the west midlands.

Mr. Grocott: Can the Minister confirm that substantially fewer engineering firms in the west midlands are now in a position to make representations to him than when the Government came to power in 1979?

Mr. Hogg: That is the sort of dreary question that we have got used to hearing from Labour Members. Let us look at the facts. Productivity in the engineering industry in the west midlands has gone up hugely in the past two years, profitability in the west midlands has gone up hugely, exports have gone up very much and inward investment has been extraordinarily successful. The opportunities for the west midlands are huge, and if the hon. Gentleman asks for figures, I will give him them.

Mr. Conway: Is my hon. and learned Friend aware that the engineering companies in Shropshire, which is part of the west midlands, are doing well under revitalised mangement? How would they progress if we had an inflation rate of 27 per cent. and the highest corporation tax in the industrialised world—both were legacies of the last Labour Government—if we were ever stupid enough to have another Labour Government?

Mr. Hogg: The plain truth is that the Labour party's policies would be a disaster for the west midlands. Let us examine just two of them. First, by their very nature, Labour's economic policies would cause inflation to escalate fast. Then there is the party's taxation policy. We have not heard much from the hon. Member for The Wrekin (Mr. Grocott) about a payroll tax, but it unquestionably features in Labour party policy. A payroll tax which would cost industry about £3 billion would be disastrous.

Mr. Speaker: indicated dissent.

Mr. Hogg: You shake your head, Mr. Speaker, as perhaps you should. [Interruption.] I can take a hint as well as the next man.

Trade Statistics

Mr. Wigley: To ask the Secretary of State for Trade and Industry whether he has received any correspondence from the Statistics Users Council on the availability of indicators on import penetration, export performance productivity, market share and home demand since the publication of the Armstrong-Rees report.

Mr. Ridley: Yes, I received a letter from the chairman of the Statistics Users Council on that topic on 4 May 1990, 12 months after the publication of the Armstrong-Rees report.

Mr. Wigley: Will the Secretary of State confirm that the correspondence that he has received is critical of the present availability of indicators? Does he accept that there must be a proper, full background of statistical information if those involved in that sphere are to improve their performance? In view of our present balance of payments it is vital that all those tools should be available.

Mr. Ridley: I agree with the hon. Gentleman that an appropriate amount of information should be available to businesses, especially when they cannot get it from sources within the industry. Against that we must weigh the burden, cost and disadvantage of excessive form-filling on the part of businesses. However, in the light of representations from the chairman of the Statistic Users Council, I am prepared to consider with industry circumstances in which businesses want to fill in the forms so that they can obtain information when there is no other source of supply. In those circumstances, it would be right to go a little further than we have in the past.

Mr. Foreman: My right hon. Friend has spoken about meeting the requirements of industry. Would not we know more about that large balancing item in our external trade statistics, and about the real state of our economy, if we had more information? Is it not time that we improved the

quality of our official statistics for precisely that purpose, as it would improve the quality of our economic governance?

Mr. Ridley: While the statistics that the hon. Member for Caernarfon (Mr. Wigley) asked about are totally different from what my hon. Friend inquires about, I am all for having good statistics relating to the effects of economic policy. The difficulty with the figures that my hon. Friend mentions— which are really a matter for my right hon. Friend the Chancellor of the Exchequer— is that, while the figures for exports and imports tend to be accurate, what is not so clearly defined is how the captial account is made up— from what elements and in what proportions. How best to rectify that is a matter for my right hon. Friend the Chancellor.

Postal Service

Mr. Harry Barnes: To ask the Secretary of State for Trade and Industry when he next intends to meet the chairman of the Post Office to discuss the future of the postal service.

Mr. Forth: My right hon. Friend the Secretary of State will meet the chairman of the Post Office, Sir Bryan Nicholson, on 21 May. They will discuss various matters of mutual interest.

Mr. Barnes: Will the Minister give an assurance that the national public monopoly on Royal Mail letters will remain? There is growing speculation that private companies are having discussions with his Department about that. We need to lay to rest once and for all fears that the Royal Mail and letters will go down the plughole, as water did.

Mr. Forth: The hon. Gentleman will be aware—as all Conservative Members are—of the undertaking given by my right hon. Friend the Prime Minister during the last election campaign that the Royal Mail would not be privatised. We should bear that in mind.
I hope that the hon. Gentleman agrees that it is incumbent on Post Office management and on the Government to work together to ensure that the people of this country have the best mail service that the Post Office is capable of delivering. That is something which is constantly considered by Post Office management, as are its duty and responsibility. We are always prepared to look positively at any suggestions that it may make to ensure that the best possible services are delivered, now and in the future.

Sir Anthony Grant: When my hon. Friend meets the chairman of the Post Office, will he tell him in no uncertain terms that unless the Post Office can guarantee that a first-class letter will reach its recipient the next day, the Government will give it to someone else who can?

Mr. Forth: My hon. Friend is entitled to lay such a hard task upon the Post Office, but it would be unreasonable to ask the Post Office to do that in the near future. Not only is that not achieved in any other country of which I am aware, but it does not give tribute and credit to the Post Office for its stern efforts to improve the delivery performance, a target which the Post Office has set for


itself. The Government and the Post Office management are looking closely at its performance, and I can assure my

hon. Friend that we shall leave no stone unturned in seeking ever-better performance in the Post Office in future.

Ravenscraig (Strip Mill Closure)

Mr. Donald Dewar: (by private notice): To ask the Secretary of State for Scotland whether he will make a statement about the imminent closure of the strip mill at Ravenscraig.

The Secretary of State for Scotland (Mr. Malcolm Rifkind): British Steel announced this morning its intention to close the hot strip mill at its Ravenscraig steel works during the first half of 1991.
While this, of course, is a matter for the commercial judgment of the company, I must make it clear that I deplored the decision and its implications for the work force. I am also very disturbed by the potential implications of closing the hot strip mill for the future of Ravenscraig as a whole.
As yet, British Steel has not provided any details as to why it believes that the closure of the hot strip mill is necessary. I very much hope that it will do so, as those affected are entitled to the fullest possible information. The hot strip mill has been a valuable asset for the company over the past three years and we are not aware why it has ceased to be so.
I also very much hope that British Steel will take all its work force at Ravenscraig into its confidence as to the longer-term employment prospects.
The decision announced by British Steel is not due to come into effect until the first half of next year. There is still, therefore, opportunity for the company to reconsider its decision and see the hot strip mill as an asset rather than as a liability.
The Scottish Office, naturally, regrets any decision that has significant adverse employment implications. As we would with any other major employer in Scotland, we shall seek to persuade British Steel to reconsider its proposal in the interests both of the company and of its work force.

Mr. Dewar: The Secretary of State has said that he deplores today's events. Will he join me in condemning a brutal announcement in uncompromising terms? Surely it is not enough simply to say that those who are about to die should be fully informed about the facts. The question is what is the Secretary of State prepared to do to recover the situation.
Does he agree that there is a strong case for the retention of the Ravenscraig strip mill in view of the growth in the European market and North sea activity? Is it not foolhardy to assume that the demand for strip products can be met by retaining capacity at only two plants? Is it not a decision based on a defeatist view of British Steel's prospects? Is it not essential that British Steel thinks again?
Does the Secretary of State accept that there is great bitterness about the way in which the work force has been betrayed by the company, but also dismay over the inactivity and spineless approach of Ministers?
Finally, will the Secretary of State tell the House why he did not meet Sir Robert Scholey for seven long and weary months? Those were the missing weeks and the dead days when damaging decisions were being taken and the Secretary of State was nowhere to be seen. Does he remember the Question Time promises on 28 March that a meeting would take place

in the relatively near future"—[Official Report, 28 March 1990; Vol. 170, c. 483.]
and as recently as 2 May that it would be shortly, yet those meetings never took place? Was not the fate of Ravenscraig strip mill worth the effort?
The Secretary of State told the press this morning that the future of Ravenscraig was not crucial to the future of the Scottish economy. Does he remember his speech at the Tory party conference at Perth almost exactly a year ago when he boasted that Ravenscraig had what he was pleased to call a new lease of life? He said:
In the private sector the strip mill is working flat out, its order book full, its workforce fully employed.
What does the Secretary of State now say to the 770 people who are about to taste the misery of the dole queue and to the thousands of others who are frightened about their future? What consolation can they take from the Prime Minister's statement in a recent interview that she has a soft spot for the loyal work force at Ravenscraig?
I repeat the essential questions: will the Secretary of State give a guarantee that he is prepared to do everything he can to reverse this decision? Will he commit himself to fight now to stop closure being a threat to steel making at Ravenscraig when 1994 comes? Will he state plainly the steps that he intends to take to recover this disastrous situation?

Mr. Rifkind: I agree with the hon. Gentleman about the desirability of doing that which can be done to reverse the decision. I was interested that he emphasised what he believes are the strong commercial reasons for retaining the hot strip mill at Ravenscraig: the strength of the market for its products, the competitiveness of its work force and the superb way in which the work force has responded to the requests made of it. I agree with and endorse all that he said about that. I further agree that if there is a prospect of British Steel reconsidering the decision, the case must be put on commercial grounds and not on emotional or political grounds. I hope that all hon. Members agree with that.
The hon. Gentleman was correct to say that at various times in the House in the past few weeks the question of contact with British Steel has been raised. He will recall, if he wishes to consult Hansard, that that was with regard to new investment, and in particular regard to Dalzell and the plate mill. As I said at that time, the Government have presented to British Steel their own paper on the desirability of considering Dalzell for future plate investment. Far from delaying on these matters, they have been actively promoted in the past few months.
With regard to the relevance of Ravenscraig to the wider Scottish economy, I say to the hon. Gentleman what I have said on many previous occasions: I believe that the future of Ravenscraig is crucial to the economy of Lanarkshire because of the employment implications if it were ever to close. Of course it has significance and implications for the wider Scottish economy, but some 98 per cent. of Ravenscraig's products do not go to steel users in Scotland but are exported to customers elsewhere in the United Kingdom or overseas. The Scottish economy is infinitely stronger and more broadly based than 20 years ago, and it is sufficiently robust to deal with the problem to which the hon. Gentleman referred.
I do not suggest that the future of Ravenscraig is other than of crucial importance to the economy of Lanarkshire.


Clearly, an employer with thousands of employees in one part of Scotland has a particular role and responsibility in that respect.

Mr. Alick Buchanan-Smith: May I assure my right hon. and learned Friend that Conservative Members support the robust line that he is taking, and we are grateful for it? Will he press British Steel very strongly about the commercial justification for this decision? Speaking from experience when I dealt with it in relation to the offshore oil industry, I did not find it enterprising in taking advantage of the opportunities of our own country and of those offshore. Will he impress on it the need to take advantage, in the interests of Scotland, of the opportunities that are available?

Mr. Rifkind: My right hon. Friend is correct. It is possible to suggest that the penetration of the British steel market by imports has in part been caused not by British Steel's lack of competitiveness but by its lack of capacity. When future investment decisions about plate and Dalzell are being made, that will deserve to be an important consideration.

Mr. Malcolm Bruce: Will the Secretary of State acknowledge that, far from being robust, his performance in the House is one of great weakness? He should have foreseen that this was coming when the privatisation of British Steel was first mooted and should have undertaken then to secure the future of an independent Scottish steel industry which would not have been closed by a management that has never disguised its hostility to Ravenscraig. Will the right hon. and learned Gentleman now give us some indication of the direct and positive action that he will secure to create an independent, viable, Scottish steel industry that will be competitive and secure for the long-term future?

Mr. Rifkind: I must remind the hon. Gentleman that, at the time of privatisation, British Steel gave a guarantee about the hot strip mill which expired only in 1989. Even under British Steel's current proposals, the hot strip mill will have continued in operation more than two years after British Steel's assurances have run out.
I remind the hon. Gentleman that British Steel announced in its prospectus at the time of flotation that it would be prepared to consider an alternative private sector purchaser for its assets if it had no continuing need for those assets in Scotand. My right hon. Friend the Prime Minister and I have drawn attention to the importance of that declaration, which may become increasingly important in the light of today's remarks.

Sir Hector Monro: Will my right hon. and learned Friend accept that I am absolutely furious at British Steel's decision to stop one of the heartbeats of the Scottish economy? Does he accept that we owe it to a superb work force to do everything possible in the House and in the Government to keep the plant open? Has my right hon. and learned Friend heard whether any of the directors have resigned, in view of this disgraceful decision and the protests about it?

Mr. Rifkind: I do not have that information, but I happily endorse what my hon. Friend said about the quality of the work force. I have already had contact today

with Mr. Brennan, leader of the shop stewards at Ravenscraig, and I look forward to meeting him and his colleagues in the near future.

Dr. John Reid: Let there be no doubt: Ravenscraig will fight this decision, and it will be right to do so. The Opposition will fight alongside Ravenscraig. It appears from the right hon. and learned Gentleman's answers that he does not have the stomach for that fight.
Will the right hon. and learned Gentleman confirm that since October last year, despite pressure, he has not met the chairman of British Steel? Is that not a pathetic reflection on his attitude towards British Steel? Is it not a remarkable coincidence that the first time that the right hon. and learned Gentleman met the chairman was yesterday morning, to receive the news less than 24 hours after the closure of the Conservative party conference in Scotland? Why did he not listen when we warned during privatisation that British Steel planned privatisation in 1988, flotation in 1989, amputation of the hot strip mill in 1990 and closure thereafter?
Will the right hon. and learned Gentleman explicitly confirm his remarks this morning, when he said:
I do not believe that the future of Ravenscraig is crucial to the Scottish economy"?
If the right hon. and learned Gentleman made that statement, it was one of appalling complacency. It makes him an accessory to this betrayal. He should either join us now in the fight or resign while he has a shred of intergrity left as Secretary of State.

Mr. Rifkind: My remarks this morning about the wider implications for the Scottish economy were identical to those that I made in the Scottish Grand Committee a year ago, and I stand by them entirely, for the reasons that I explained at that time. I repeat that I believe that the future of Ravenscraig is crucial to the Lanarkshire economy, for the reasons I gave. If the hon. Gentleman wishes to do a service to his constituents, rather than make political points he would be better advised to seek co-operation with all those on both sides of the House who would like British Steel to reconsider that decision. If the hon. Gentleman does not welcome that co-operation, he shows himself as being politically partisan and uninterested in the well-being of his constituents.

Mr. Allan Stewart: Will my right hon. and learned Friend bear in mind that the House has heard a great deal of rhetoric from the Opposition but not a single positive suggestion of a course of action other than that which he has rightly and properly announced to the House? Is it not deplorable that during this serious announcement several Scottish Labour Back Benchers were smiling and laughing? Will he further underline the importance of British Steel's obligation to offer Ravenscraig for sale if it has no further use for the plant? Does he agree that there is a danger that at some point in the future British Steel will make that decision but not make it public?

Mr. Rifkind: I agree with my hon. Friend that it is important that, at the appropriate time, British Steel honours the commitment that it gave in the prospectus. I understand that it still maintains that it sees a value in its assets in Scotland. We must point out to it that the


credibility of that assertion is not assisted— indeed, it is seriously damaged— by its current proposals for the hot strip mill.

Mrs. Margaret Ewing: Does not the Secretary of State realise that his pleas that people unite behind him in a campaign to save Ravenscraig ring hollow because of his distinct failure to address the issue, despite former pleas from Members on both sides of the House? Is it not the case that he failed to recognise the investment starvation of the Ravenscraig works headed by British Steel and that he made no attempt to have a meeting with Black Bob Scholey to discuss the matter at an appropriate time and ensure that the investment was made? Is he not presiding over the death of the steel industry in Scotland? Is not the only option left to the Scottish steel industry to become independent? The market and the skilled work force are there and the people of Ravenscraig and Dalzell are the people who will build that industry, not the Secretary of State.

Mr. Rifkind: The first part of the hon. Lady's question would carry more conviction if the shop stewards at Ravenscraig had not reacted with absolute fury to the partisan conduct of the SNP and if the shop stewards and trade unions had not dismissed the SNP as political posturers with no real commitment to the well-being of the industry.
On the latter part of the hon. Lady's remarks, the question whether there could be a free-standing steel industry in Scotland with alternative ownership depends in part on the attitude of British Steel and whether other persons or bodies in Scotland or overseas would be interested in such an acquisition if it were available.

Sir Nicholas Fairbairn: Will my right hon. and learned Friend confirm that the reason why British Steel has temporarily chosen to centre its works in Wales is that the Labour Government and the nationalised steel industry preferred to invest there? Is it not the case that they did so without the support of our party but with the support of the Scottish nationalists?

Mr. Rifkind: My hon. and learned Friend is correct in his recollection of those matters.

Mr. Norman Buchan: Is not the figure that the Secretary of State gave—that Scottish industry used only 2 per cent.of the steel from Ravenscraig— a terrible indictment of the past 10 years' history of this Government? They have torn the heart out of heavy industry and manufacturing industry in Scotland. If he had any vision or intention of developing a manufacturing and heavy industry base in Scotland, he would recognise that we require the steel mill and more. As he has no stomach for the fight, will he keep it in mind that he should see himself not only as the Secretary of State of a Tory Government but as the spokesman for Scotland on this matter? He must work for Scotland.

Mr. Rifkind: On the earlier part of the hon. Gentleman's remarks, I hope that he will be fair and will recollect that between 1974 and 1979 many thousands of steel jobs were lost. The Labour Government of the day accepted that that was commercially sensible and necessary. Indeed, it has been a feature of the steel industry

under successive Governments of whatever political complexion that the battle to achieve competitiveness and commercial viability has led to that conclusion.
I endorse the thrust of the hon. Gentleman's latter remarks. If hon. Members on both sides of the House wish to have the maximum prospect of influencing British Steel, Scotland must speak with a single voice, and all those who have an interest in these matters must concentrate on sensible, commercial, mature arguments and resist the temptation to indulge in political back-biting which may give pleasure to their supporters but will be of little benefit to the well-being of the steel industry.

Mr. Bill Walker: Does my right hon. and learned Friend agree that, because the European regulations prevent any form of Government aid, there is no question of the Government being able to pump public funds into this concern?
Does my right hon. and learned Friend also agree that the productivity and work records of the work force and management at Ravenscraig merit them being told clearly what British Steel's investment programme is for the future of Ravenscraig, particularly slab production? Is it not also important that, if it does not give that information, British Steel should be instructed by all in politics in Scotland to get on with the job of offering the Scottish plants for sale, and then we shall see what commercial interests there are in carrying on productivity in Scotland?

Mr. Rifkind: It is indeed the case that the rules of the European Commission preclude any member Government of the European Community from giving financial aid to primary steel production. On my hon. Friend's latter remarks, I endorse the view that the work force at Ravenscraig, who have responded superbly to the requests of British Steel management in recent years, are entitled to the fullest information from British Steel, not only about the reasons for the decision announced this morning, but about British Steel's future intentions for its plant and the livelihood of its work force.

Mr. Alexander Eadie: Is not the right hon. and learned Gentleman aware that the announcement that he has made today is, to some extent—bearing in mind that it was a commercial decision—an indictment of the policy he has implemented in relation to the privatisation of the steel industry, where the Government have lost control of the situation? Would he further agree that he must not be too hard on the people of Ravenscraig if they are a bit emotional about their position? After all, their jobs and their ability to sustain their wives and families are on the line, and any hon. Member would be emotional about that. Does he realise that a spin-off from this will be a loss to British Rail, which depends on Ravenscraig for 40 per cent. of its freight? If the right hon. and learned Gentleman is serious about the fight, let us hear what he proposes to do. The problem will not go away as easily as the right hon. and learned Gentleman thinks.

Mr. Rifkind: The hon. Gentleman is correct to refer to the understandably strong feelings of those who work at Ravenscraig. However, I remind him that it was Mr. Tommy Brennan, the shop steward at Ravenscraig, who appealed for an end to political partisan in-fighting, and for all the Scottish political parties to co-operate in seeking


to press on British Steel that there was a good commercial case for investment in Ravenscraig and British Steel should have confidence in its future.

Mr. Richard Holt: All of us with British Steel works in our constituencies are concerned at British Steel's announcement today. While I applaud my right hon. and learned Friend's attitude, may I remind him that Corby steel works was closed down and today that town has over-employment, that Teesside has suffered its share of job losses, but today it is booming, and that only last week Consett announced a new and exciting venture and industrial park that will use integrated alternative energies and bring 1,300 jobs to that part of the world in the near future? Should not we stop looking backwards and start looking forwards?

Mr. Rifkind: My hon. Friend is correct to emphasise that, while the steel corporation was under public sector ownership, there were massive job losses in Consett, Corby and Shotton, under successive Governments, both Labour and Conservative. He is also quite correct to emphasise that the only real contribution that we can make to the well-being of the work force in the steel industry, whether in Ravenscraig or elsewhere, is to look to the future and put a commercial case showing why there should be investment and confidence in a particular steel plant.

Mr. Tom Clarke: Is the Secretary of State aware that Members from steel constituencies such as mine will regard his statement today as pathetic and humiliating? Does he accept that neither he nor his hon. Friend the Member for Stirling (Mr. Forsyth) is in a position to fight for Ravenscraig, given their posture during the closure of Gartcosh, which is where the story began? Will he further agree that his failure to defend the Scottish steel industry, in the light of the European straitjacket, of the lack of investment and of the experience in the North sea, where 41 per cent. of tubes and pipes used came from overseas, hardly qualifies him to fight for what is left of this industry? In view of the devastation that this announcement has heaped on my constituents and on the people of Lanarkshire in general, will he and the hon. Member for Stirling put their jobs on the line in the same tragic way as these people have done today?

Mr. Rifkind: I would have more time for the hon. Gentleman's remarks if he had referred to the major job losses in the steel industry during the period of the Labour Government of which he was such a conspicuous admirer. We all know that there have been major rationalisations in steel employment. The hon. Gentleman cannot expect to carry authority if he thinks that massive job losses under a Labour Government are acceptable but that, when they happen subsequently, they are to be condemned. He would do a service to his constituents if he concentrated on ways in which we can encourage British Steel to reconsider its position instead of indulging in the rather emotional hype that we have just heard.

Sir Hal Miller: Does the Secretary of State agree that this whole discussion shows how wise we were to privatise British Steel so that the additional investment is made in Wales and elsewhere according to the requirements of the market, and so that we get away from doing what the Labour Government did, which was

to refuse to implement the closure of the Beswick plants, which led to tragic losses both of subsidy and of jobs and to the closure of steel firms in the west midlands?

Mr. Rifkind: I very much agree. My hon. Friend has rightly identified the proper approach.

Mr. John McAllion: In the last few years the Secretary of State has been telling us that the Scottish economy is in good shape and on course to grow even stronger in the 1990s. How does he square that with today's closure and the loss of 800 jobs, or with the sustained withdrawal of investment from Scottish steel and the slow strangulation of the Scottish steel industry? Does he not recognise that an economy without the steel industry is like a car without an engine— it is going nowhere, which is precisely where he and his party are going unless they act to reverse this catastrophic decision?

Mr. Rifkind: The remarks that I made at new year have been more than vindicated by events since then. There have been continuing significant falls in unemployment; there have been massive new inward investment decisions which have been welcomed throughout Scotland; and the Scottish economy is now doing better than that of the United Kingdom as a whole.

Mr. Ian Gow: Does not a due sense of humility oblige my right hon. and learned Friend not to seek to substitute his own commercial judgment for that of British Steel?

Mr. Rifkind: That is a perfectly fair observation, but what I have said is not quite what my hon. Friend implies. I have said that if British Steel believes that there are good commercial reasons for reversing the view that it has taken over the past three years, its work force, who have responded splendidly to encouragement to increase productivity and competitiveness, are entitled to know what British Steel's commercial considerations are. So far that information has not been forthcoming.

Mr. Menzies Campbell: Does not the right hon. and learned Gentleman feel a sense of paradox in that the work force at this plant have been the subject of praise from him and others yet they now find themselves completely frustrated and unable to do anything but accept a decision made elsewhere? If he was only told about this yesterday, was not that an insult to his office, to the people who work in the plant and to the people of Scotland? If he was told yesterday, why did he not tell the House before?

Mr. Rifkind: The hon. and learned Gentleman is talking nonsense, and he knows it. British Steel is a private company. I understand that the matter was put to the board on Monday, and as board members themselves were asked to authorise the proposal only on Monday I do not think that I or anyone else can complain about being informed on Tuesday.

Mr. Phillip Oppenheim: Is it not the case that the health of the steel industry as a whole depends on management and not politicians making decisions of this sort? The sad truth is that there was never any economic justification for building the strip mill at Ravenscraig. Does my right hon. and learned Friend agree that the attitude of Opposition Members shows that their conversion to the market is wafer-thin? They are in favour


of the market only in so far as it makes life easy for them. When it comes to the difficult decisions, they are always more than ready to jettison the market.

Mr. Rifkind: My hon. Friend is right. Only investment that has a commercial rationale is likely to stand the test of time. No one is doing any service to any part of the United Kingdom by wishing to maintain economic activity which requires massive subsidy and does not have an economic rationale.

Mr. Michael J. Martin: The Secretary of State is wrong to say that the closure affects only the economy of Lanarkshire, because the economy of my constituency and every other part of Scotland is affected by this tragic decision. I hope that he will bear that in mind. Given the problems of the Scottish economy and the fact that steel is a major part of it, it is strange that the Secretary of State has not met Bob Scholey. Will he tell us the reason for that? Only a few years ago an all-party Select Committee made an excellent case for Ravenscraig staying open. Perhaps the Secretary of State should refer to that report.

Mr. Rifkind: Of course I accept that there are implications for other constituencies arising from the decision about Ravenscraig. I in no way depart from my central propositon about the crucial importance of Ravenscraig to the economy of Lanarkshire; that is self evident.
The hon. Gentleman asked me about meetings with Sir Robert Scholey. I do not regularly meet the chairmen of major private companies in Scotland. I have meetings when they are required for a specific purpose. The hon. Gentleman will be well aware that over the past few weeks the main interest of the House has been in the future of Dalzell and future plate mill investment. Some weeks ago we submitted a lengthy paper to British Steel arguing the commercial case for Dalzell being the favoured location for investment in plate. British Steel is currently considering that paper and it will be necessary to have discussions with the company on its analysis of that.

Mr. Ian Bruce: Does my right hon. and learned Friend agree that British Steel has been extremely successful during a period of reduction in the steel market throughout the European Community while we had steel quotas? Is he satisfied that Government subsidies to the Italian and other steel industies have left us with a level playing field? Are subsidies by other Euro Governments to their steel industries causing additional problems for the steel industry in Britain and especially in Scotland?

Mr. Rifkind: I certainly acknowledge the importance of my hon. Friend's point, which is primarily for my right hon. Friend the Secretary of State for Trade and Industry. My hon. Friend is correct when he says that British Steel has been very successful in winning new markets in Europe. It is precisely for that reason that Ravenscraig and especially the hot strip mill have been so fully utilised in the past three years. That is precisely why it has proved wise for British Steel to continue to use this valuable asset.

Mr. Alex Salmond: Is the Secretary of State aware that the squalid excuses that he has given constitute the weakest ever performance at the Dispatch

Box? Will he explain to the Scottish people why, when we have an enormous market building up in the North sea, Scottish steel has been run down? Why has he failed to meet the chairman of British Steel, and why is he not putting his job on the line to defend the Scottish steel industry?

Mr. Rifkind: The hon. Gentleman would sound slightly more convincing if he would explain to the shop stewards at Ravenscraig why his view on the steel industry should he supported when every senior trade union spokesman in Scotland has dismissed SNP policy as positively harmful to the interests of his industry.

Mr. Tim Smith: rose—

Mr. Speaker: Order. Was the hon. Gentleman here for the statement?

Mr. Smith: Yes.

Mr. Speaker: In that case, I can call him.

Mr. Smith: Can my right hon. and learned Friend confirm that, between 1975 and 1980, £3·3 billion worth of taxpayers' money was invested in British Steel, and that in the next five years the figure was £4·5 billion, but that during that period thousands of jobs were lost? Since then the British steel industry has been transformed and privatised. Is not one of the principal advantages of privatisation that management can now manage without political interference? Would it not be a grave mistake to go back on such a system?

Mr. Rifkind: If my hon. Friend is saying that it would be a grave mistake for political considerations to determine investment by British Steel or any other company, I entirely agree with him. It is important that the commercial arguments that may be used to justify a major closure should be fully examined. If British Steel is confident that it is justified in its commercial interpretation of the situation, there should be no reluctance on its part to discuss its reasons with its work force, which is most affected by the decision.

Mr. Robert Hughes: Has the Secretary of State no shame in coming to the House to call for a bipartisan approach to saving Ravenscraig when he and his colleagues spent two or three days in Aberdeen in an orgy of self-indulgence and eulogy on the Tory party and the free market? How can he call for a bipartisan approach when he has resisted such an approach to investment? Is the Department of Trade and Industry backing his approach to saving Ravenscraig?

Mr. Rifkind: The approach that I have suggested might be helpful to the interests of Ravenscraig is the approach called for by the shop stewards, and the one that the Standing Commission for the defence of the Scottish steel industry said would be in the interests of Scotland. If the hon. Gentleman is seriously interested in assisting the prospects for Ravenscraig, he must ask himself whether the kind of politically partisan remarks that he has made will help or harm the objectives which he says he desires.

Mr. Thomas Graham: Some weeks ago, I asked a question about the Scottish steel industry and the support that should come from the Government for the magnificent work being done by that industry in Scotland. The Minister for Industry accused


me of leading with my double chin. Let us see leadership from the Secretary of State to ensure that we save the steel industry in Scotland. If he is unsuccessful, not only he but every Scottish Office Minister should resign.

Mr. Rifkind: I was waiting to hear whether the hon. Gentleman was offering to resign the representation of his constituency if he were unsuccessful in maintaining employment in a company in his constituency. I did not catch him making that offer.

Mr. Gavin Strang: Does not the Secretary of State realise that this will not be seen as a commercial issue in Scotland because, even if it were in the commercial interests of British Steel to close the plant, it would not be acceptable to the Scottish people? People recognise that the steel industry is crucial to the long-term industrial future of Scotland. Is he not aware that it is all very well to have these reports of how the Conservative party in Scotland and Scottish Office Ministers will be leading a campaign against closure, but his Government presided over the decimation of the market for steel products in Scotland with the closure of the plants at Bathgate and Linwood and elsewhere and the rundown in the shipbuilding and engineering industries. His Government have paved the way to this decision, through privatisation. They should use the powers they took to privatise the industry to secure its future in Scotland.

Mr. Rifkind: By his intervention, all that the hon. Member has proven is that he is good at making political points but not much use to the steel workers in Ravenscraig.

Mr. Donald Coleman: I remind the Secretary of State of the informed view of Ian MacGregor, who said that a minimum of five steel plants was essential for the British steel industry. How can he say that today's announcement conforms with that informed view of the former chairman of British Steel? How is today's announcement of a partial closure at Ravenscraig compatible with the announcement by the then Secretary of State for Trade and Industry, the right hon. and learned Member for Rushcliffe (Mr. Clarke), that, should Ravenscraig be threatened with closure, another buyer could be found? How can closure take place in such circumstances?

Mr. Rifkind: I am interested in the reported remarks of Sir Ian MacGregor, who clearly carries a great deal of

authority on steel matters. It would be helpful if his views were seriously considered. British Steel—it was not only my right hon. and learned Friend—gave a commitment in its prospectus to make its assets available to an alternative purchaser if it had no further use for them.

Mr. Roy Hughes: Does the Secretary of State appreciate that British Steel's announcement is of considerable relevance to the steel industry in Wales? I appreciate the success of both Llanwern and Port Talbot in recent years, but does not the announcement mean a general scaling down of the steel industry as a whole, which could have a highly detrimental effect on the British economy?
Following the Budget, the Secretary of State mounted a successful rescue operation for the poll tax in Scotland. Will he do the same for Ravenscraig, or will he resign his high office?

Mr. Rifkind: I must leave my right hon. Friend the Secretary of State for Wales to comment on the implications of today's announcement for the Welsh economy. I believe that there is an opportunity for mature Scottish opinion to make its voice heard and to put forward a serious and sober case setting out why British Steel should reconsider on commercial grounds the decision that it is proposing to implement at Ravenscraig.

Mr. Jimmy Hood: Is the Secretary of State aware that Opposition Members are angry? To be honest, however, we are not surprised. When the Government were pushing the privatisation of the steel industry through the House, we in Scotland told them that the right hon. and learned Gentleman was washing his hands of the Scottish steel industry. Easter is past, but we still have a Pontius Pilate at the Dispatch Box. The hon. Member for Tayside, North (Mr. Walker) called upon the right hon. and learned Gentleman to resign; Opposition Members call upon him to resign. Indeed, the whole of Scotland will want his head if he lets British Steel pull out of Ravenscraig.

Mr. Rifkind: When a Labour Government preside over massive reductions in employment in the steel industry, Labour Members seem to find that acceptable and commercially necessary. They apply different criteria when they think that it is in their political interests to do so. The hon. Gentleman may impress himself, but not his constituents.

Oil Pollution (Devon Coast)

Mr. Anthony Steen: (by private notice): To ask the Secretary of State for Transport if he will make a statement on the devastation caused by oil pollution along the south Devon coastline.

The Minister for Aviation and Shipping (Mr. Patrick McLoughlin): At 15.09 on Saturday 12 May a collision took place between the Liberian-registered oil tanker Rosebay and the Brixham trawler Dionne Marie 14 miles south of Start point. Rosebay sustained damage to her port side, which resulted in about 1,100 tonnes of crude oil being spilt into the sea. The master immediately took action to minimise the extent of the spill, by transferring oil from the damaged tank into other tanks. Within 90 minutes the oil leak ceased. The marine pollution control unit was informed of the collision by Brixham coastguard at 15.25 and activated its counter-pollution aircraft at 15.30. The first aircraft began spraying at 18.00.
The marine accident investigation branch is investigating the collision. Its initial findings are that it was the duty of the fishing vessel under the international collision regulations to give way, but her watchkeeper did not see the tanker and made no alteration of course. The tanker took evasive action but it did not prevent the collision. Visibility at the time was approximately three to four miles. The MAIB report into the collision will be completed as soon as possible.
The dispersant spraying operations, which continued the next day, successfully dispersed 75 per cent. of the spilled oil. However, the remaining 25 per cent. emulsified with sea water to form an estimated 700 tonnes of what in the industry is called "mousse", which does not respond to treatment with dispersant. With natural breakdown that has now reduced to 400 tonnes. Had the dispersant spraying not taken place the original spill would have emulsified into some 3,500 tonnes of mousse. That would have had to be either recovered at sea—a difficult, slow, and weather-dependent process— or cleared off the beaches.
A joint Government-local authority response centre has been set up to direct and control the beach-cleaning operations. The area is difficult, with rocky cliffs and fast-flowing estuaries. There are several important amenity beaches, some bird colonies and an area designated as one of outstanding natural beauty. The MPCU is overseeing the preparation of detailed plans for clean-up by the local authorities. Appropriate techniques and storage sites have been identified.
The main beach-cleaning effort began at first light today. Local authority and MPCU equipment was deployed to appropriate access points during the course of yesterday evening. The main emphasis will be on the mechanical recovery of oil from amenity beaches and accessible rocky areas, pressure washing of hard surfaces and the eventual use of dispersants for final clean-up where that is essential. Much of the rocky areas will be inaccessible and the only option will be to watch for oil moving from those areas to more sensitive ones. Extra specialist personnel provided by the MPCU from the Warren Spring laboratory have been allocated to South

Hams district council, which is bearing the brunt of the pollution. In addition, trained operators will accompany specialist equipment as it is deployed, to advise on use.
I pay tribute to the local authorities involved for their preparation, which enabled them to make a rapid response to what is obviously a major threat to an area of outstanding natural beauty. Their concern is shared fully by myself and local Members of Parliament. Indeed, my hon. Friend the Member for Teignbridge (Mr. Nicholls) is on the Bench with me. It was because of the prompt action of the Department of Transport's marine pollution control unit that 75 per cent. of the oil did not reach the shore.

Mr. Steen: The oil spillage is a major catastrophe for one of the most beautiful parts of the country. I pay tribute to the Minister for alerting me to the problem and then keeping closely in touch with me as the progress of the slicks was reported to him.
The first problem is that although the damage has been curtailed to about 12 miles of the 88 miles of heritage coastline, which is a great tribute to the Government and the county council, it still means that 12 miles of beaches are saturated by oil. In one place— Challaborough beach, Bigbury— it is up to 18 in. deep. A great deal of work needs to be done. How will those involved disperse 12 in. of oil on some of the heritage coastline? Where will they put all the oil and sand that they clean?
Can my hon. Friend confirm that both public and private beaches will be cleaned and that some of the inaccessible coves will be approached by helicopter? Devon county council has said that helicopters are not available. Will my hon. Friend make them available if required? Will the services of the military be called upon if necessary? There are 700 commandos in my constituency, the Royal Naval college at Dartmouth and also HMS Cambridge. Will the military be called upon for immediate action should that be required?
There has been good co-ordination at local level, but to deal with the mousse once it has landed on the shore, the Ministry of Agriculture, Fisheries and Food needs to issue a licence. Devon county council and South Hams district council fear that getting a licence out of MAFF may mean a further delay. Can my hon. Friend help with that? There are five fine estuaries as well as a number of other inlets. Is everything being done to ensure that oil does not get up the estuaries?
The area is one of the finest in Britain for the tourist industry. Will my hon. Friend say something about that industry and about what will happen to those whose livelihoods have been affected by this terrible spillage? As to the remedial action that is being carried out by his Department, Devon county council and South Hams district council, to which I pay tribute, will the Minister confirm that no cost will fall on the community charge payer and that the Government will find ways of funding it entirely from the centre?
This is a catastrophe of a type which has never happened to this coastline before. We have to learn something about the cause.

Mr. Speaker: Order. This is a question to the Minister. The hon. Gentleman might apply for an Adjournment debate to make all these points.

Mr. Steen: I am grateful to you for your guidance, Mr. Speaker.
Does the Minister intend to investigate not only the cause of the accident but whether oil tankers should be lying along the south Devon coastline for many hours? Should not some of the larger oil tankers have double skins to protect them from such a collision? Will the Minister say something to the people of south Devon to help them deal with the terrible tragedy?

Mr. McLoughlin: I shall try to respond to the many points that my hon. Friend put to me. I can understand that the cost, and the matter of who will meet it, will cause concern to my hon. Friend's constituents. I give him a total assurance that the cost of the clean-up operation will be met entirely by the polluter. There is insurance cover on the tanker. There will be no cost to community charge payers. I am sure that my hon. Friend and his constituents will be grateful for that. It is in line with Government policy that the polluter should pay for the damage that he does. That is an important point, which needs to be made.
If there are any problems about getting agreement from the Ministry of Agriculture, Fisheries and Food, we shall be ready to help. We have already obtained from the Ministry the permission that is necessary to use dispersants. We keep in close contact with the Ministry. I do not foresee any difficulty, but if there is, we shall take it up.
Special action is being taken to try to safeguard the estuaries. My hon. Friend has rightly pointed out a great difficulty in that there are a number of estuaries in the area. A great effort is being made to protect them by putting booms across to try to stop the oil going up the estuaries.
Tourism is an important point. It is impossible to give a definitive estimate as to when all the oil will be cleaned up, but I very much hope that within two weeks we shall have restored as best we can some of the worst affected areas. I assure my hon. Friend that the restoration operation will apply to the whole coastline. There will be difficulty in the more inaccessible parts, which are rocky and treacherous. Obviously, we could not put anybody in danger. My hon. Friend asked about the use of helicopters. That will be considered. If it is thought the most appropriate way to help, we shall take advice on it.
My hon. Friend asked about the use of the Army. At the moment we feel that there are enough people and facilities in place. However, should we think it necessary to call on the resources of the armed forces, that option is open to us, but we do not yet feel that that is necessary.

Mr. David Harris: Does my hon. Friend accept that serious though the incident is—it is very serious, particularly in the constituency of my hon. Friend the Member for South Hams (Mr. Steen)—if prompt action had not been taken by the marine pollution control unit, we would have had a massive environmental disaster, stretching not just along the Devonshire coast but along the coast of Cornwall? Will my hon. Friend deal with a point that he did not answer? Will he assure the House that there will be a thorough inquiry into how the collision took place?

Mr. McLoughlin: I join my hon. Friend in congratulating the marine pollution control unit, headed by Captain McLeod, and the people who work in it. There was a very prompt response. The unit was informed at 15.25 and was spraying at 18.00. If it had not been for the speed of the response, the position would have been more serious, as my hon. Friend said. I assure my hon. Friend,

as I said previously, that an accident investigation is being carried out at the moment and that any lessons that can be learned from it will certainly be learned.

Mr. Simon Hughes: Above all, I welcome the Minister's statement that the polluter and not the poll tax payer will pay. Will he confirm that the polluter will be prosecuted if any offence has been committed, and that that is being actively investigated? There has been a comprehensive response but sadly it has not been sufficient, and it has not stopped damage to the environment. To that extent, the response has without doubt been too little, or too late, or both. Therefore, given that the estuaries are now at risk as well as the coastline, will the Minister say what action is being taken? I understand that booms are not restraining the oil but have been breached, and that oil is now going up into the estuaries on the Devon coast. Is action being taken to deal with that as well as the other matters that I mentioned?

Mr. McLoughlin: We have been given constant prophecies of doom and gloom by the hon. Gentleman. He started on Monday with a question on energy, telling us that the community charge payer would have to pay. If he had taken the time and trouble to investigate and to find out the facts, he would have realised that that is not the case and that the polluter will pay. It is typical of the hon. Gentleman to say that the response is too little, too late. As far as he is concerned, anything that was done would have been too little and too late. I regard setting up an operation within two or three hours of the incident being reported as very effective. We have 3,000 miles of coastline to protect around the United Kingdom and the Department does an excellent job in protecting it.

Mr. Robert Adley: My hon. Friend knows that people who live and work along the Devon and Cornwall coast lie in fear and trepidation of such events, and we are grateful for the speed with which the problem was tackled. Will my hon. Friend investigate the links between oil companies and detergent companies? Is he aware that many detergent companies are owned by oil companies, so the companies that create the problem in the first place make a profit out of trying to clean it up? Will he study his files? He mentioned Warren Spring laboratory. If he looks at the old files, he will see that I tried and failed some 16 years ago to get the Department to take seriously an invention by one of my constituents, who was driven out of business because oil companies wanted to go on selling detergents rather than see my constituent's Oil Mop company come to successful fruition. Will he carry out a full investigation so that at some time in the future we may be able to prevent people who have a commercial interest in selling detergents from having a first crack of the whip and let those who have the technology lift oil from the water at an early stage before it comes ashore?

Mr. McLoughlin: I am grateful to my hon. Friend. All the responses to deal with such problems are directed by the marine pollution control unit. It says what should be used and charges the polluter for any costs incurred by the Department of Transport.
I cannot accept some of the theory behind what my hon. Friend said—that somehow masters of oil tankers and other vessels go all out to cause collisions so that


companies can benefit from the clean-up operation. Such accidents are serious and it is to the master's credit that he immediately switched tanks to stop any further spill going into the sea. Of course we shall investigate any complaints that my hon. Friend draws to our attention. However, I congratulate those involved on what has been a fairly successful operation. It has not been totally successful. I wish that it had been, as it would have saved us all a lot of trouble and it would also have prevented some devastating effects on the coastline. We regret that there has been pollution, but I assure my hon. Friends that everything is being done to ensure that that pollution is removed as soon as possible.

Mr. Dennis Skinner: The Minister said that the polluter will have to pay. Is he aware that this has the makings of a long-drawn-out legal wrangle? The case of the disaster off Alaska is still being resolved in the courts and the case arising from the disaster off Birkenhead has not yet been settled. I cannot imagine that as there has been a collision there will not be contending parties who will say, "It is not my fault." The Government have a responsibility not to stay at arm's length, but to make it abundantly clear to all those working for local authorities in Devon and for other organisations that might have to foot the bill, that while the wrangling is going on in court, the Government will ensure that money is in place. Otherwise it will be paid for in the community charge. The Minister has to answer those questions so that people in Devon fully understand the consequences.

Mr. McLoughlin: Not only is the vessel insurance cover about £8 million, but the United Kingdom is a member of an international organisation that provides compensation of up to £30 million for oil pollution. I do not think that the Alaska oil spill was covered by such an international agreement.

Mr. Ian Bruce: Will my hon. Friend comment on the availability of resources to the marine pollution control unit? It clearly acted with the utmost speed, but it may not have had sufficient resources to saturate the problem. Will he have discussions with the armed forces, particularly the Navy, to see whether the pollution dispersant can be made available to them at immediate notice in the same way that helicopters are made available for sea rescue? Can my hon. Friend assure me that the slicks will not reach Dorset? Finally, if the fishing vessel, not the carrier, is shown to have been at fault, will the insurance held by the carrier compensate those affected?

Mr. McLoughlin: An investigation is going on and it would be wrong for me to apportion blame at this stage. The dispersant is on 24-hour standby and a number of planes which I inspected two weeks ago, are already part of the marine pollution control unit and on standby. We have also substantially increased the number of hours flown around our coastline for observation purposes. Therefore, quite a lot is being done in that regard. Ships were on their way within two hours, so that was a satisfactory response. However, we are always ready to learn from any incident.

Mr. Jeremy Hanley: My hon. Friend the Member for South Hams (Mr. Steen) is

fortunate in representing one of the most beautiful constituencies, and one that I visit every year. However, I am worried by my hon. Friend the Minister's statement earlier that the fishing vessel may have been at fault. If so, any amount of insurance that is carried by the oil company will be worthless and there will be legal wrangles. The hon. Member for Bolsover (Mr. Skinner), in one of his rare gleams of sense, has put his finger on the important point of who will provide the money while the matter is being sorted out. Will my hon. Friend take a personal interest in the matter and visit the site so that he can experience at first hand its natural beauty? Perhaps he can fly over the site in a helicopter to see the extent of the damage.

Mr. McLoughlin: I am assured that in this case the polluter will pay and that there will be no problem about the recovery of the money. That is the best advice that I have. I was in Devon last week, admittedly in north not south Devon, but I am only too well aware of the outstanding beauty of the area.

Mr. Tam Dalyell: In response to the hon. Member for Dorset, South (Mr. Bruce), the Minister said, doubtless in good faith, that he hoped that everything possible was being done, but is not the anecdotal evidence that some of us have from the North sea coast that the marine pollution control unit is chronically and seriously under-resourced? May we have any facts that the Minister has on the amount of money that has been spent on it, what the estimates are for a proper unit which, sure enough, will be needed sooner or later, how that will be achieved and what, in the view of his expert advisers, is the shortfall? This is a serious issue.

Mr. McLoughlin: I reject what the hon. Gentleman has said. I am satisfied that we have an effective marine pollution control unit, which responded within a short time of being notified. Within five minutes of the head of the unit being told of the incident, an aircraft was flying to the site. Had it not been for that speedy reaction, we should be dealing with a far more serious incident.

Ms. Joan Ruddock: I am grateful for the opportunity to question the Minister on this subject. However, I hoped that his hon. Friend the Minister for Public Transport would be present to issue a statement on the tragic deaths of four railway workers this morning on the Metropolitan line. Perhaps a note could be sent to me about that.
The House is grateful to the Minister for announcing an inquiry into the Rosebay incident. Can he say whether the Liberian authorities have agreed to co-operate? Will he publish the report, and will he ensure that the inquiry examines the level of crewing on the tanker and establishes whether their skills and training were adequate for accident prevention and were properly employed on this occasion? Can he confirm that the tanker was in its correct navigational lane? After similar incidents— for example, the Amoco Cadiz and Torrey Canyon disasters— separate tanker lanes were enforced, reducing the danger of tankers passing near to land.
Does the Minister agree that the devastating effects of the accident might have been avoided if the tanker had had a double skin? There is growing international support for a requirement for all tankers to have double skins, to avoid


oil spillage. Will he join me in condemning the economic expediency that rejects such measures, and puts profits before the protection of the environment?
The Minister will be aware that discussions are taking place in the International Maritime Organisation about whether vessels weighing more than 150 tonnes should carry their own oil spill response plan. Will he give us the Government's views on that proposal, which Opposition Members believe could limit appalling environmental damage and the economic threat to the all-important tourist area of Devon?

Mr. McLoughlin: Let me repeat that an accident investigation is in progress, and of course its report will be published, as is normal with marine accident investigation reports. Its initial finding is that, under international collision regulations, it was the duty of the fishing vessel to give way. However, the watchkeeper did not see the tanker and therefore did not alter his course. The tanker took evasive action, but could not prevent the collision. Visibility was three to four miles. I hope that the report will be completed as soon as possible. I have already given its interim findings. The quick action of the master of the Rosebay prevented what could have been a much more serious accident, given the amount of oil on the ship.
The hon. Member for Lewisham, Deptford (Ms. Ruddock) referred to double skins. I accept that that is an important matter, and it is being investigated by the IMO. However, it would be no good trying to apply such a requirement unilaterally. The IMO is conducting a detailed review of technical standards and the procedures that apply to tankers. Double skins may not be the only answer; I have been advised that there are serious problems with gas build-ups.

Caernarfon Hospital

Mr. Dafydd Wigley: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
The closure at the end of this week of the Caernarfon hospital casualty unit"—
the only casualty unit in the town.
The matter is specific as it arises from the recent decision to close Caernarfon cottage hospital—the sixth hospital closure to be announced in the county in the past 12 months—but it has assumed greater importance because we had expected the closure to be phased and that there would be some co-ordination of alternatives, but the casualty unit is to be closed this week. We learned yesterday that the general practitioners who are expected to cover for the closure have not agreed on how that cover is to be achieved.
The matter is important because, obviously, mothers of children who have accidents and need urgent treatment do not know where to go, and given the short notice of the closure, there has been no opportunity for the town to be notified about the alternative arrangements, and in some circumstances it could be a matter of life and death.
The matter needs urgent consideration because of the stampede by the health authority, acting without proper co-ordination and public information. No doubt co-ordination has been badly affected because of a senior secretarial strike taking place this week, arising from the failure of the authority to negotiate a proper salary settlement. The problem arises largely from the chaos in the health authority, which has a £4 million deficit this year and is in a mad panic, closing wards and services in all directions.
The responsibility for that must be identified. If it is the fault of the health authority for its failure to manage its affairs, quite frankly, the health authority managers should resign. Alternatively, it is the fault of the Welsh Office for failing to provide the health authority with adequate resources and for failing to insist on proper strategic planning of services.
The casualty unit closure is a blow to the town of Caernarfon, causing considerable difficulty in the area. It requires urgent debate. The Welsh Office Ministers must come out of their bunker and face up to the health shambles for which they must take ultimate responsibility.

Mr. Speaker: The hon. Member for Caernarfon (Mr. Wigley) seeks leave to move the Adjournment of the House under Standing Order No. 20, for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
The closure at the end of this week of the Caernarfon hospital casualty unit.
I have listened with care to what the hon. Gentleman has said about this important matter, which affects his constituency. As he knows, I have to decide whether to give it precedence over the business set down for today or for tomorrow. I regret that in this case the matter does not meet the criteria of the Standing Order. I cannot, therefore, submit his application to the House.

Amusement Machines (Protection of Children)

Mr. Patrick Thompson: I beg to move,
That leave be given to bring in a Bill to empower local authorities to prohibit in their area the use by children of amusement machines.
There is good support from both sides of the House for a measure along the lines of what I am proposing. That may not be immediately apparent from the number of hon. Members in the Chamber, but I know that I can muster good support for the measure should it come to a Division.
The Bill aims to give local authorities teeth to deal with the serious problem of arcade addiction. It is right that the Bill should specify the age of 16. If local authorities felt that the problem was serious in their areas, they would be given powers to ban those under 16 from amusement arcades. Young people under 16 are not yet responsible for their own actions and need guidance from adults. Sixteen is the right age limit and will achieve maximum support in the House.
We have legislation to protect those under 16 from under-age drinking, smoking or buying cigarettes and solvent abuse. More recently, measures have been introduced to prevent them from using chatlines. We should also protect them from the evil of gambling.
I have been involved in the campaign against under-age gambling for at least two years. The misery caused by addiction to amusement-with-prize machines in arcades is real among young people and their families. Many cases have been brought to my attention in Norwich and in all parts of the country. I am grateful to the National Council on Gambling, Westminster city council and the associated amusement arcades action group and other organisations for bringing all those cases to my attention. There are on record cases of theft, attempted suicide, broken homes, child prostitution and more serious crimes as a result of arcade addiction. Many hon. Members, including my hon. Friends the Members for Brighton, Kemptown (Mr. Bowden) and for Lancashire, West (Mr. Hind) and the hon. Member for Glasgow, Pollok (Mr. Dunnachie), have had serious cases of arcade addiction brought to their attention.
Arcade addiction is more serious than official statistics suggest. Even on the basis of Home Office figures. as many as 1·3 million out of 5 million children in the 10 to 16-year-old age group are spending money on amusement-with-prize machines. Of those, at least 250,000 children could be gambling in arcades unaccompanied by parents or friends. A recent survey conducted by the Gaming Board for Great Britain showed that, of 151 arcades visited in 1987, 94 were admitting under-16s and 53 of them were members of the British Amusement Catering Trades Association. Yet there is a code of practice that seeks to prevent under-16s gambling in arcades. In spite of that, the code of practice is still being flouted and that is why legislation is necessary.
I do not want to place too much emphasis on statistics, but the facts call into serious question the view taken by the Home Office that a change in the law is unwarranted. I do not agree with that view and I am most grateful to my

hon. Friend the Parliamentary Under-Secretary of State for the Home Department for being present to listen to my ten-minute Bill. I have had the opportunity to discuss the matter with him on a number of occasions. However, I commend the various initiatives that the Home Office has taken with local authorities and with BACTA. The display of notices outside amusement arcades and the code of conduct are good practice. I thank the Home Office for its support to that extent, but I seek to persuade my hon. Friend and his colleagues in the Department that a change in the law commands good support in the House, and I hope that the Bill will eventually be enacted.
In Norwich there are very good liaison arrangements between the education and youth services, the social services, the city council and the police, in dealing with arcade addiction. But all those initiatives do not address the main issue. Access to arcades is all too easy for young people, many of whom are also playing truant from school. The figures are extremely disturbing, but time does not permit me to go into detail on that serious connected issue. The attraction of the bright lights is causing young children to go into the arcades and gamble. Even if the numbers were small—it is difficult to ascertain the exact numbers because so many of the cases that have been brought to our attention have been confidential, as families do not seek to publicise the problem—there is a real risk of serious addiction and it is important that we should address it.
Under present legislation, potential arcade operators have to apply to local authorities for permits and for planning permission. The wording of schedule 9 of the Gaming Act 1968 makes it more difficult for a local authority to refuse to renew a permit than to deny an applicant a permit and planning permission in the first place. Local authorities are therefore wary of refusing to renew permits unless they are denied access to inspect or unless there are serious problems with the operation of the machines.
That is why I believe that it is sensible to give local authorities discretion, as the Bill seeks, to ban under-16s from amusement arcades should they feel that the problem is serious in their area. It is reasonable to make the age limit of 16 a legal requirement.
Acceptance of the Bill would bring amusement-with-prize machines and arcades in line with the law on other forms of gambling. The distressing cases that have been brought to my attention and to that of other hon. Members provide all the evidence that is needed to justify the Bill or a similar measure, and I commend it to the House.

Question put and agreed to.

Bill ordered to be brought in by Mr. Patrick Thompson, Mr. Jack Aspinwall, Mr. Andrew Bowden, Mr. Simon Coombs, Mr. Derek Fatchett, Mr. Tony Favell, Mr. Paul Flynn, Mr Roger Gale, Mr. Conal Gregory, Mr. Kenneth Hind, Sir Charles Irving and Miss Ann Widdecombe.

AMUSEMENT MACHINES (PROTECTION OF CHILDREN)

Mr. Patrick Thompson accordingly presented a Bill to empower local authorities to prohibit in their area the use by children of amusement machines: And the same was read the First time; and ordered to be read a Second time upon Friday 8 June and to be printed. [Bill 142.]

Questions to Ministers

Mr. Bob Cryer: On a point of order, Madam Deputy Speaker. One of the ways of calling Ministers to account is by raising on the Floor of the House the difficulties that one encounters.
I have recently tabled a series of questions to the Department of Employment. Often the question produces the rubric, "I will answer this question as soon as possible." I give plenty of time—generally a week—for a priority answer to a written question. The Department is evading responsibility for immediate answer to the House when information is sought for a particular purpose and by a particular date. I raise this matter in the knowledge that successive Speakers have deprecated any unnecessary, planned or deliberate delay, and I wish to re-emphasise the importance of that.

Madam Deputy Speaker (Miss Betty Boothroyd): I join former Speakers and Deputy Speakers in deprecating such action, and I shall make a point of looking into the matter.

Orders of the Day — Finance Bill

(Clauses 3, 9, 10, 20, 23, 25 and 68)

Considered in Committee [Progress 15 May.]

[MISS BETTY BOOTHROYD in the Chair]

Clause 20

CARE FOR CHILDREN

Mr. Paul Boateng: I beg to move amendment No. 40, in page 11, line 6, at beginning insert —
'( ) In section 154(2) of the Taxes Act 1988 after "section 155" there shall be inserted "or section 155A.".'.
This is a technical drafting amendment designed to meet a surprising omission by the Government draftsmen. I trust that it will be accepted by the Government in that spirit. It is entirely helpful and non-controversial.

The Chief Secretary to the Treasury (Mr. Norman Lamont): One of the most exciting things that can happen in a football match is when, with the first kick of the ball, someone scores a goal. I am happy to thank the hon. Member for Brent, South (Mr. Boateng) for his suggestion.
Amendment No. 40 is not technically correct, but it identifies a defect in the Bill. I am grateful to the hon. Gentleman for moving it and I undertake to table an amendment on Report to deal with the omission.

Mr. Boateng: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Boateng: I beg to move amendment No. 41, in page 11, line 6, at beginning insert—
'The following section shall be inserted after section 131 of the Taxes Act 1988—
131A. Where an employee makes a contribution out of his emoluments towards the cost of the provision of childcare, and the conditions set out in section 155A below are satisfied in respect of such care, that contribution shall be regarded for the purposes of section 198 below as an expense wholly, exclusively and necessarily incurred in the performance of the duties of his employment.".'.

The Second Deputy Chairman of Ways and Means (Miss Betty Boothroyd): With this, it will be convenient to consider the following amendments: No. 25, in page 11, line 6, leave out from second 'section' to end of line 10 and insert
'144 of the Taxes Act 1988—

Care for children

144A—(1) Notwithstanding any other provisions of the Taxes Acts the provision for an employee of care for a child or the financing of such provision by any means (including vouchers redeemable only for such care and reimbursement of the employee's expenses incurred in procuring such care) shall not be treated as an emolument chargeable to income tax under Schedule E if the conditions in subsection (1B) below are met.

(1B) The conditions are that—'.

No. 5, in page 11, line 10, at end insert—


'( ) the employee is not a person to whom section 154(1) applies by virtue of his being employed as a director of a company or in employment with emoluments at the rate of £25,000 a year or more.'.

No. 6, in page 11, line 13, at end insert —
'(aa) the care is provided primarily during the employee's working hours in the employment by reason of which it is provided.'.

No. 26, in page 11, line 14, leave out sub-paragraphs (b) and (c) and insert —
'(b) the care is provided on premises which are not the normal place of residence of the child or employee.'.

No. 13, in page 11, leave out lines 14 and 15.

No. 7, in page 11, line 15, at end insert —
'(bb) the care is provided under arrangements which are equally available to any other employee of the same employer whose child has an equal or greater need of such provision and for whose child it is practicable to make such provision.'.

No. 27, in page 11, line 21, leave out subsections (2) and (3).

No. 42, in page 11, line 21, at end insert —
'(e) in the case of close companies (as defined in section 414 of the Taxes Act 1988), child care facilities of a broadly similar nature are made available by the employer to all employees (this condition will be satisfied even if not all employees make use of the facilities so provided.)'.

No. 43, in page 11, line 21, at end insert —
'(f) at premises where child care facilities are provided, they must be of a broadly similar standard.'.

No. 8, in page 11, line 25, at end insert 'and'.

No. 9, in page 11, line 27, leave out from 'persons' to end of line 30.

No. 10, in page 11, line 28, after 'employer', insert
'or an associated company of the employer'.

No. 16, in page 11, line 29, leave out
'and managing the provision of the care.'.

No. 11, in page 12, line 25, at end insert
'"associated company" has the meaning given in section 416 below;'.

No. 12, in page 12, line 29, after 'educational', insert 'or recreational'.

No. 17, in page 12, line 30, leave out 'eighteen' and insert 'sixteen'.

No. 14, in page 12, leave out lines 31 and 32.

No. 18, in page 12, line 37, at end insert —
'(3) This section shall operate to relieve the taxable benefit from basic rate tax only. The benefit is still to be charged at the excess of higher rate over basic rate tax.'.

Mr. Boateng: I am obliged to the Chief Secretary for his kind words, but I do not intend to allow them to go to my newly exposed head. I fancy that he is unlikely to be so welcoming to these amendments.
The amendments, sadly, are necessary as a result of the defective and stunted clause 20, which the amendments seek to improve. It is defective and stunted because the Government have been the subject of two competing forces. The first is an impulse, for public relations purposes, to appear to be doing good, in this case to hard-pressed parents, and women in particular, who are at a tax disadvantage when they are in receipt of child care benefits from their employer. They are the recipients of what the Government would have us believe is their largesse.
The second competing force is a compulsion that characterised every aspect of the Budget— to do as little as possible at minimal cost. We therefore have this push-me-pull-me provision, which fails to address the

central issue of removing obstacles to the provision of workplace nurseries and child care provision for working parents.
Given the past of the Chief Secretary, it is perhaps not surprising that clause 20, which he will seek to defend this afternoon, is stunted and defective, because at every turn he has opposed the reasonable suggestions made by Labour Members on every Finance Bill since 1985 to overcome the hurdle to the expansion of child care provision for working parents. He fought us tooth and nail, and the last time that he replied to a debate on this anomaly in the taxation rules he was scathing of the arguments ably and convincingly put forward by my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith). He told—us-and he will remember the debate well:
There is no reason to believe that the present tax treatment of child care expenses is a barrier to the employment of women with children."—[Official Report, 11 July 1989; Vol. 156, c. 894.]
On 11 July 1989, there was apparently no reason to believe that a barrier existed, yet today he accepts that there is a barrier, which the Government are belatedly seeking to remove. We look forward to learning what changed his mind.
We must not look a gift horse in the mouth; we are glad to see the Chief Secretary in his place at all. He was not present yesterday; he left it to his minions, pleasant and engaging though they are, to do the business. We are entitled to ask why the right hon. Gentleman has taken the time out this afternoon to address the Commitee on this issue. It may well be that he does not trust the Economic Secretary or the Financial Secretary to resist—

Mr. Nicholas Brown (Newcastle-upon-Tyne, East): Understandably.

Mr. Boateng: My hon. Friend is being slightly, and uncharacteristically, uncharitable. I am sure that the Chief Secretary trusts his colleagues' understanding. Indeed, he fears that their understanding is such that they may concede the reasonable points that he has already heard and that he knows will be forthcoming not only from the Opposition but from at least one Conservative Member. Not trusting them, the right hon. Gentleman has come here to ensure that there are no concessions.
5 pm
We should not be surprised that Conservative Members speak with a forked tongue about child care. I do not mean to be unkind—[HON. MEMBERS: "Oh."] Well, perhaps on reflection, I do mean to be unkind. We have become used to such behaviour by Conservative Members. Indeed, there is a game that can be played, "Spot the quote". One wins a prize—a day out in the Kingsway day nursery, surrounded by photogenic children and attentive staff—if one can say who said what.
Let us look at some of the comments that Conservative Members have made about child care. First, there is this advice on how working mothers might be helped:
Can they in fact go out at all at that stage in their children's life?
Should not
several women get together and arrange that one looks after the children while the others work part time"?
I wonder who said that. Any offers from Conservative Members? It was someone to whom they should pay attention—indeed, someone to whom they must pay


attention day in, day out. The Chief Secretary suffered more in that respect than any other person. It was, of course, the Prime Minister, no doubt speaking from her vast experience while other women took care of her children as she practised part tune at the Bar and practised part time as a politician. [Laughter.] One may well laugh, because the right hon. Lady did not ever practise part time in that way, nor did she come to a cosy relationship with other part-time working mothers to look after her delightful twins.
Another well-known Conservative Member said:
If they want or need help in this task they should make the appropriate arrangements and meet the costs."—[Official Report, 12 July 1988; Vol. 137, c. 150.]
Who said that? Any offers from Conservative Members? It was not the same lady but none other than the hon. Member for Derbyshire, South (Mrs. Currie)—a figure from the past, but one who speaks with the authentic voice of many Conservative Members when talking about child care.
There is another example, and this is the choice quote. There is a double prize for any Conservative Member or, indeed, any Opposition Member—I shall extend the offer —who can guess who said this:
I don't think the State should step in to help the working mother unless her life has collapsed.
Who said that?

Ms. Hilary Armstrong: The chairman of the ministerial group on women's issues.

Mr. Boateng: Indeed, it was none other than the right hon. Member for Oxford, West and Abingdon (Mr. Patten), whose job is to chair the ministerial group on women's issues. That comment shows the attitude of Conservative Members to working mothers and to child care. If they come to the Dispatch Box expecting us to be thankful for clause 20, they have another think coming. We are here to bury these little Caesars, not to praise them, and they should be under no illusions about that.
We need to reflect on the response by those who have the responsibility for the day-to-day care of children and those who have the responsibility for the day-to-day management of these facilities. What is their response to the largesse in what the Government would have us believe is their generous little clause? The Busy Bees consultancy works with companies that are interested in subsidising child care in order to help them establish child care provision, and it is doing important and valuable work. The managing director states:
This tax exemption will not in the end benefit anything like the numbers of employees we had originally hoped. Only employees of very large companies stand to benefit. Many firms have a need for 10 or 20 places, for which it is not economically viable to set up a nursery. With very little more imagination, a lot more could have been achieved.
Why has that imagination not been applied to what the Chancellor described as this small supply-side measure? It may be a small supply-side measure, but it gets smaller by the hour. The orchestrated fanfare that greeted the Chancellor's comments on this measure would have led people to believe that we would be dealing with a growing number of workplace nurseries and other forms of child care provision based in the nursery. That has not happened. The 3,000 children who benefit from existing workplace nursery provision are unlikely to be joined by

large numbers. We are not tackling the demographic time bomb in relation to women at work and not freeing parents to maximise their contributions to the economy.
This is not just a child care issue or educational issue, although it is both; it is also an economic issue. It is about maximising the pool of skills if our economy is to go forward, but the Government have failed in that respect.

Mr. Tim Smith: Will the hon. Gentleman give way?

Mr. Boateng: I shall give way in due course because I know that the hon. Gentleman has a valuable contribution to make.
The scale of the problem shows that it is all that much more of a pity that the Government have missed this opportunity. A survey by the Department of Employment and the Training Agency found that only 198 of the 1·1 million persons surveyed had kids in employer-provided creches. That is the scale of the inadequacy of existing provision. Only 3 per cent. of the institutions or organisations surveyed provided workplace nurseries, with only 20 in the private sector and the rest in the public sector. Despite the trailing of this measure in the run-up to the Budget, only 5 per cent. of the companies surveyed even considered establishing a workplace nursery.
Hon. Members ask whether this measure effectively encourages employers—even the 5 per cent. who were considering it—to take the plunge. We must reach the sad conclusion that it will not, because it fails to have the flexibility necessary to bring about the expansion that we all seek. That flexibility would enable companies which wish to provide nursery places to buy them in existing community nurseries and to choose between what local authorities and the voluntary sector offer. Companies would be able to buy places and in so doing encourage the expansion of existing provision.
Companies are specifically excluded from doing that under clause 20 as it is presently drafted unless they can show that they are involved in the management and financing of centres. That is why we tabled amendment No. 9. I hope that the Minister will concede that our amendment would enable his provision to have the effect that it should have of expanding the present supply of workplace nurseries and places for the children of working parents in nurseries.
We look to the Minister to make an early response on this matter and to concede that our amendment will have the effect that I have outlined. If not, we shall have no option but to press amendment No. 9 to a Division. It is absolutely vital if we are to succeed in expanding child care provision.

Mr. A. J. Beith: I agree with the hon. Gentleman's general sentiments, but why is he willing to accept so many of the Government's own restrictions, such as the rule that nursery care cannot be provided on domestic premises? Will he bear in mind the fact that many well-organised playgroups start in domestic premises? If the hon. Gentleman accepts so many of the Government's restrictions, rather than supporting the type of amendments that I have tabled and the hon. Member for Billericay (Mrs. Gorman) has tabled, he will leave the Bill restricted.

Mr. Boateng: We know that the Chief Secretary has set his mind against any expansion on that scale. As the hon.


Gentleman rightly says, our amendments are modest. We ask not for the world but merely that the Chief Secretary accept amendments which are within the spirit of the Chancellor's Budget statement.
At the end of the day and at the beginning, fiscal measures such as the Government propose are not the best and certainly not the only way of providing the level and standard of child care that we seek. There is no alternative to a comprehensive child care policy. There is no substitute for a policy that is designed to maximise choice and flexibility for working women while maintaining standards at all times. We are not prepared to tolerate a policy by which the Government simply seek to meet the economic needs of the time and to overcome the demographic time bomb. We are not prepared to sacrifice the life chances of young children. We do not believe that that is right.

Mr. Michael Stern: rose—

Mr. Boateng: That is why we say that the Government should attend to the generation and release of resources to enable local authorities to play the co-ordinating role that we believe that it is right for them to play. Local authorities have the necessary expertise and know-how. They are ideally placed to exercise a strategic function in the provision of child care. We want to hear the Government's proposals on that matter.
Should we take it that the Government's only concern is a minimal extension of child care provision by the means that they have outlined, which would involve little effort or attention from the Government? Do they cling to the mistaken belief—the Chief Secretary expressed it on 11 July last year—that the market will mysteriously meet the needs of children and working parents? There is every reason to believe that it will not.

Mr. Tim Smith: Will the hon. Gentleman give way?

Mr. Boateng: Simply by mentioning the word "market", I have prompted an immediate response from the die-hard monetarists who still lurk on the Conservative Benches. I feel obliged to let the hon. Gentleman have his say.

Mr. Smith: It was the word "mysterious" that prompted me to intervene, not the word "market". There is nothing mysterious about the way in which the market will work. If employers want to employ more mothers and women, they will make the necessary arrangements. The market will accommodate them.

Mr. Boateng: The hon. Gentleman may say that that will happen, but the Confederation of British Industry, which is certainly aware of the mysteries of the market, calls more and more frequently on the Government to intervene to moderate the operation of those mysteries, which seem to work so obviously against the interests of the British economy. The Institute for Fiscal Studies specifically warns against some of the measures promoted by the monetarists. I make no apology for mentioning the CBI or the Institute for Fiscal Studies. Why should a Treasury Opposition spokesman apologise for calling in aid of our case the CBI and the Institute for Fiscal Studies?
It is a sign of the extent to which Conservative Members have slipped from reality, with regard not only to child care but to the economy.
We are committed to a comprehensive child care policy.

Mr. Stern: Will the hon. Gentleman give way?

Mr. Boateng: In due course.
Our amendments must be seen in that context. I hope that the Chief Secretary will address himself to amendment No. 41 specifically and assure us that it is acceptable. Surely this matter should not divide or stretch the consensus of the House. It seeks to recognise the position, which will not be uncommon, when provision is made by an employer for child care but the employer says to the employee, "We expect you to make a contribution." It seems right that in those circumstances the philosophy that underlies section 156(1) of the Income and Corporation Taxes Act 1988 on contributions that might be deducted from benefit should apply and the employee should not have to pay tax on the part of his or her emoluments that goes towards child care provided by the employer. That does not seem unreasonable. Certainly it does not make excessive demands on the Treasury. We look to the Chief Secretary to take that on board at an early stage in his reply.
All the experience of recent years is that unless measures are taken to encourage employers to make provision for child care and to facilitate take-up by employees, the hoped-for expansion in child care simply will not take place. We want that expansion to take place, for the benefit of the child and of the economy. It is in that spirit that we have tabled the amendments and look for a positive response from the Minister.

Mrs. Teresa Gorman: It ill behoves the hon. Member for Brent, South (Mr. Boateng) to berate the Conservative party on any change of mind because his party has changed its mind on so many policies in the past 10 years that it is hard to keep up with them. It has changed its mind on nationalisation and council house sales, and has practically ditched clause IV—the backbone of its philosophy. It is squirming around trying to find some new policies and has hit on the woman's vote as one opportunity to make hay while the sun shines in the lead-up to the next election.
Nevertheless, I find myself largely in sympathy with the amendment tabled by the hon. Gentleman, most of all because it is an almost straight crib from my recent ten-minute Bill. Labour Members knew from my discussions with them that my ten-minute Bill attracted enormous attention, not least from trade unions, which wrote to congratulate me on the forward-looking views of the Conservative party in making such a point to the House.
I received a number of letters from women who said that they had never before written to a Conservative Member of Parliament, but were absolutely 100 per cent. behind the Conservative party as the party moving such ideas into the public arena. Even the National Union of Teachers wrote to me congratulating me on my success in the House of Commons. It wrote to tell me that there was a major shortage of teachers in schools and 400,000 qualified teachers, inactive at home, looking after children. It said that it greatly welcomed the Conservative party's


initiative in putting that fact in the public arena. It is the Conservative party that is at last putting that principle into legislation, with clause 20.
My only quarrel with clause 20 is that it limits the opportunity for employers to pay for workplace nurseries to the workplace itself. My amendments seek to expand that idea so that an employer may pay for child care provision other than at the workplace, but in a formally constituted nursery. That would mean that a mother would not have to take her children to her workplace, but could leave them near home in a nursery, knowing that they were properly cared for and having the peace of mind to go about her job for the rest of the day.
I am sure that, when the Treasury decided to make this concession, it did not realise that it was so limited in scope and that perhaps only about 3,000 women stood to benefit. I hope that today we can persuade my right hon. Friend the Chief Secretary that it would be equitable to expand that provision so that a great many more women can have that opportunity.
At present, the proposal is also limited to large employers who can afford to pay for a workplace nursery. I wish to extend it so that a number of small firms can combine to use nursery places. That would stimulate the growth not only of new nurseries but of the labour force available to small businesses. It therefore falls in with the pattern of Conservative Administration ideas to stimulate the market economy.
I understand that the Treasury will be concerned about the likely cost of such a concession. I appreciate that the Treasury does not like opening up new tax allowances, but we give tax allowances for things of which we approve. The Conservative party is the party of home ownership and gives tax allowances on mortgage interest. We are the party that, recognising the importance of pensioners building up savings as they grow older, has given tax allowances on those savings so that they can be added to income and allow pensioners to be self-supporting. In the past, we have also agreed that it is a good idea to encourage people to have meals during their working day, so we give a tax allowance on meal vouchers. The principle of tax allowances in support of things in which we believe is thus a well established practice in Conservative philosophy.
I estimate that the concession to allow a nursery to be provided somewhere other than at the workplace would cost about £25 million—a small amount of money—for one year. What is more, that money will come back to the Treasury, partly through the increased economic activity of women going to work and partly from the taxes collected on the prosperous new nurseries stimulated by imaginative extension of the principle. The Treasury, which usually anticipates a 100 per cent. loss on any concession, could thus look forward to a gain in revenue if the idea were extended to a broader spectrum of women.
As the first woman to speak in this debate, I wish to consider the matter from a woman's point of view. There is nothing new about married women with children going out to work to supplement the family income. That has been done for generations. In poorer families, women often went out to do domestic work. In the cotton towns of the north they provided much of the labour in the factories.
The needs of modern society have widened the type of work available, and the changing status of women, for which we have all fought in the past 50 years, has meant

that many of them choose to carry on some form of paid work outside the home. Every girl these days earns her own living between leaving school and getting married. Some undertake a long training and become so absorbed in the subject that they want to continue that work after marriage. For many of those girls, the sort of work involved in running a home is insufficient to use all their abilities and they feel that they are not working to their full capacity.
Some men I know are far too ready with the phrase, "a woman's place is in the home", forgetting that their own daughters will almost certainly earn their living outside the home, and that some of them will want to carry on their careers. While they condemn women in careers in round terms, they would be thrilled if their own daughters were to achieve those new career heights. The choice is up to the woman—if she has no particular interest and finds work in her home satisfying and absorbing, clearly she will develop her interests in that centre. If she has a pronounced interest in some other direction in which she has already achieved some measure of success, it is essential for her own satisfaction and the happiness of her family that she should use all her talents to the full.

Ms. Dawn Primarolo: I am sure that the hon. Lady would not wish to suggest—if she does, it is incorrect—that women, whether married or not, do not have the right to economic independence in their own right. Their right to pursue their careers, whether or not they have children, should not be frustrated by the lack of child care facilities or some out-of-date idea that once women marry they should be satisfied to stay in the home and not have economic independence in their own right.

Mrs. Gorman: I certainly agree with the hon. Lady that women and their families should be able to make provision for their own needs, and it should not be a matter for state intervention. However, there should be tax provision, as I am arguing.
People in general, apart from men with working wives, are often unsympathetic to working wives. It is a pity that so many women with young children have to be out of their careers for 10 years or more. After 10 years it is often hard to pick up again, especially if it is scientific work because things change and develop so rapidly.
It would make a tremendous difference if part of the expenses of employing other people to run her home were allowed against tax.
I must make a confession—those are not my words, but the words of a working woman in the 1950s. Clearly, she is a woman with hands-on experience of the problem and great sympathy for the woman's point of view—a woman's woman. The woman concerned was, of course, our great Prime Minister and I hope that as First Lord of the Treasury she will seek to influence the thinking of the Treasury in this respect. I am sure that Treasury Ministers will wish to broaden these measures to include a much wider spectrum of women, just as I am sure that my right hon. Friend the Prime Minister, whose sentiments are clearly my own in these matters, would wish them to do so. All women who go to work will benefit from such an extension.

Mrs. Sylvia Heal (Mid-Staffordshire): I welcome the opportunity to make my maiden speech in the House. In so doing, I am mindful of and will respect the traditions


and customs of the House. I should like to record my thanks to right hon. and hon. Members and to the staff of the House for their warm welcome, many offers of help, numerous pieces of advice and several offers of pairing.
I should have liked to enter the House under different circumstances, and I wish therefore to pay tribute to my predecessor, the late John Heddle. He was a Member of the House for a decade and he represented the Mid-Staffordshire constituency following its formation in 1983. I extend my sympathy to his widow and family. Although I did not have the privilege of meeting him, I know from comments made by my constituents that he was regarded as a man who worked hard and conscientiously to represent them. I am sure that he is missed by his former constituents, and not least his family.
I look forward with enthusiasm and confidence, however, to the challenges that the electors of Mid-Staffordshire have given me. My constituency was formed by the Boundary Commission in 1983. It is a long, narrow constituency stretching from the north to the west midlands and it is not based on a single community. It is predominantly rural, but it contains three main towns.
Lichfield is a pleasant cathedral town and the birthplace of the wit Samuel Johnson, who dubbed it a city of philosophers. In the middle of the constituency is Rugeley, a predominantly industrial town dominated by two power stations and a mine. Thirty miles to the north lies Stone, a canal-side market town which has attracted a wide variety of national and international companies.
During the time I have been associated with Mid-Staffordshire, I have learnt why the people there have a pride and affection for the area, which many right hon. and hon. Members on both sides of the House visited during the election campaign. Indeed, the influx of so many politicians and representatives of the media gave a mini-boost to the local economy which was much appreciated.
Although peace and tranquility have returned, many of the problems in the area remain. The constituency is set in the heart of middle England and comprises industrial, commercial and rural concerns, with large housing estates, small picturesque hamlets and a work force of professional, managerial and skilled people, so it can rightly be seen as a microcosm of the United Kingdom. That is why the issues that concern my constituents affect the whole country. The continuing increase in the rate of inflation is bringing misery and a hard financial struggle to many home owners and making it impossible for others to get a foothold on the property ladder. Industry is looking for more stability to give it the confidence to plan ahead for the investment and growth that are essential for the prosperity of us all.
The Health Service and education were also issues in the election campaign, but one issue came to dominate it and it would be remiss of me not to mention it. I refer to the poll tax—the harshest, most regressive and unfair tax to be imposed on the British people in more than 600 years. It is misleading to pretend that the rebate system offers any real protection because even the least well of will have to pay a minimum of 20 per cent. The many debates and Divisions in the House on the poll tax have resulted in a majority for the Government, but I find my views best summed up by Dr. Johnson, who said:

Though we cannot out-vote them we will out-argue them. They shall not do wrong without it being shown to themselves and to the world.
Today we have been debating workplace nurseries, which are meant to provide access to employment for parents. There is, however, another group of people for whom access to employment is difficult—people with disabilities. The Office of Population Censuses and Surveys records the fact that about two thirds people with disabilities depend on state benefits. Because of the additional costs incurred from chronic illness and disability, this means that many face added problems in trying to live on an inadequate income, which further affects the quality of their lives.
The current benefit system is both chaotic and unjust. It should be replaced by a single system of assessment of disabled people and their careers. Benefit should be paid according to need, not according to how people became disabled or whether they were in employment at the time. Only 31 per cent. of all disabled adults of working age are employed, compared with 69 per cent. of the general population. That is certainly not due to any lack of motivation or ability—it is due to lack of opportunity. Many of us take the challenges and rewards of employment for granted. Those who have experienced a period of unemployment will know that it brings not just a loss of income but a loss of dignity, self-esteem and social contact.
Even if people with disabilities have the qualifications and expertise to do a job, they have to overcome discrimination on the grounds of their disability. Studies conducted by the Spastics Society in 1986 and 1989 provide scientific evidence to back up what disabled people know from their own experience—that they face discrimination often from the moment of initial inquiry about a job. The Spastics Society's research shows that two in every three valid applications from candidates with a disability will be treated in a discriminatory way.
The society attempted theoretically to place a secretary in appropriate vacancies advertised in newspapers. For each position, two applications were sent and similar characteristics were described in each letter, except that the applicant's disability was mentioned in only one of them. Nearly twice as many interviews were granted when the disability was not mentioned as when it was. Such results spell discrimination in capital letters.
Discrimination means seeing an applicant's disabilities rather than his abilities, and although many employers would like to behave in a more socially responsible way, they fail to recruit people with disabilities because of ignorance and fear that it will involve them in extra work, expense and special consideration. Yet often these are small considerations such as a handrail, a ramp, a flashing light on a phone, or a lower desk or work bench. For some, the requirement may not be a physical adaptation of the office or factory but a flexible working pattern—flexi-time or part-time working.
It is important to make a distinction between physically and mentally disabled people, because people recovering from mental illness often face even greater hurdles when trying to return to employment. The illness or breakdown may have been a long time ago and the person may be completely recovered, but although the person may have the best qualifications and the right experience for the job, a history of mental illness can lead to the second-best applicant getting the job.
It is not only the private sector which fails to employ disabled job-seekers. Government Departments and, with some notable exceptions, local authorities also fail to meet the quota set in the 1944 Act. In view of demographic changes, skill shortages and the challenge of 1992, the Government should be taking a lead in ensuring that there are no obstacles to encouraging people with disabilities to enter or return to the employment market with appropriate schemes of rehabilitation and training. However, that in itself is not sufficient. Having acquired skills and regained their confidence, the hopes of such people are dashed when the door of opportunity to employment remains closed. I am convinced that, if real progress is to be made in providing equality of opportunity for people with disabilities, a more active approach by employers is necessary and legislation to outlaw discrimination is an important step.
It has been a privilege to address the House and I thank hon. Members for the courtesy that they have extended to me. Following my success in the by-election, I was reminded of the words of Aneurin Bevan when he said:
Election is only part of representation. It becomes full representation only if the elected person speaks with the authentic accents of those who elected him"—
or, in this case, her.
That does not mean he need be provincial and that he speaks in the vernacular. It does mean he should share their values, that is, being in touch with their realities.
I believe that I share the values of the people of Mid-Staffordshire and I shall endeavour to represent them in the House to the best of my ability for a long time to come.

Mr. Stern: I am delighted to have this opportunity to follow the hon. Member for Mid-Staffordshire (Mrs. Heal) in what the whole Committee will agree was a most distinguished maiden speech. We are grateful to her for her kind and perceptive comments about her predecessor, who was well liked by all hon. Members As the hon. Member for Derby, South (Mrs. Beckett) knows, because she is another veteran of attempts to define disability benefits when we sat for many hours in Committee on the 1985 and 1986 Social Security Bills, I am delighted to welcome an hon. Member who has such a clear and deep understanding of the issues that are involved.
My two words of warning are, first, that the hon. Member for Mid-Staffordshire should not assume that on subsequent occasions she will be surrounded by so many of her hon. Friends and, secondly, that any mention of pairing will inevitably give rise to about 150 letters arriving in her pigeon hole.
My speech is a breach of about four years' silence on Finance Bills, because it is the first occasion on which I have had the opportunity to speak on a Finance Bill since last year, when I ceased to be a PPS. I shall take the opportunity to support what the Government are trying to do by way of the clause and to oppose the thinking behind some of the amendments. As the hon. Member for Brent, South (Mr. Boateng) said, I share with Ministers something of a Damascene conversion on the clause, because for years I was opposed to the principle of workplace nurseries. However, I have come to support it because the form of tax relief proposed in the clause will achieve the limited objective that has been set out for it.
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The clause is not designed to provide general tax relief for child care. If it did, I and many hon. Members would be wholly opposed to it. It is designed to do what a new tax relief can at the right time and place and on occasions achieve. It will give a limited nudge to an existing market in order to help it expand without at the same time distorting that market. If we were to give the tax relief that is blithely set out in amendment No. 41 or, I regret to say, in the amendment spoken to by my hon. Friend the Member for Billericay (Mrs. Gorman), not only would we not achieve the objective of the clause, but we would set up a vast new distortion for about one third and what we hope will eventually be almost a half of the working population. No system of tax relief should be designed to do that and I should not support such a system.
The hon. Member for Brent, South made several blithe assumptions. He has fallen into a trap, as so many people do when looking at a particular tax relief. He looks at what the tax relief would cost and what it would achieve, assuming no change in circumstances. However, it is plain that if tax relief of the range and extent that he proposes in amendment No. 41 were to be given, it would affect not a few thousand people but a few million, and it would affect them to the extent of what is probably their greatest living expense.
My estimate—I invite the hon. Gentleman to challenge it—is that to give tax relief to all working mothers, or to working fathers when they have the responsibility, on what they have spent out of their income on child care would cost several billion pounds. So much for the value—

Mr. Boateng: The hon. Gentleman invites an immediate response. Will he give way?

Mr. Stern: I shall do so in due course. I assure the hon. Gentleman that I shall give way to him more quickly than he gave way to me.
Amendment No. 41 deals with an employee making a contribution, which will be determined by that employee, towards the cost of child care. The other conditions in the clause would then have to be satisfied. Apart from the provisions in the clause, there is no limit to the size of the contribution that the employee could choose to make. One assumes from the wording of the amendent that the employee could spend up to the limit of income. We read with some surprise the document that came from Walworth road yesterday because it says that there will be no uncosted pledges. However, any pledge of this nature is wholly uncosted because it is wholly uncostable. We read that all pledges about future public spending would have to be based on what the economy could afford. Within 24 hours of that document being issued, we have heard a pledge that I assume will cost the Exchequer several billion pounds. I shall now give way to the hon. Member for Brent, South.

Mr. Boateng: I do not want to interrupt the hon. Gentleman's flow, but he pushes me and I am happy to answer him. He misunderstands the import of amendment No. 41, either unintentionally or mischievously, and seeks somehow to undermine the good sense of the provision. The amendment seeks to deal with a relatively rare but important occurrence when an employer provides a work-place nursery for his employees. He would provide such a place within the restrictions of the current clause and would then require the employee to make a


contribution. Let us take a fairly typical example from the constituency of my hon. Friend the Member for Mid-Staffordshire (Mrs. Heal)—the Busy Bee nursery. My hon. Friend is to be congratulated on her excellent maiden speech.

The Second Deputy Chairman: Order. I appreciate that the hon. Member was invited to intervene, but I hope that he will not make a second speech at this stage. He must remember that this is an intervention.

Mr. Boateng: That is why I was reluctant to intervene. I was brought to my feet by a Conservative Member. I shall deal with the example when I wind up the debate. The hon. Member for Bristol, North-West (Mr. Stern) is misdirected and his ideas are misconceived.

Mr. Stern: I look forward to the hon. Gentleman making his second speech.
The amendment says nothing about an employee being required to make a contribution. It refers merely to an employee making a contribution. As several of my hon. Friends have pointed out, the hon. Member for Brent, South has eschewed the invitation, as no doubt he will again when he winds up, to put a cost on the amendments. So we see, within 24 hours, yesterday's Walworth road document being discredited.
We are not talking about general provision of child care with tax relief, nor should I support such a move because the cost would be astronomic. We need to decide what we mean by child care to realise how astronomic the cost would be. People think, particularly when they read the briefings with which we have been showered, that when we talk about providing for child care we are talking about something that is done through a workplace nursery or through a registered child minder. However, we must take it into account that that is only a tiny proportion of child care as it is borne by most families and principally by most women.
For example, many local authorities have estimated over the years, although no reliable research is available because of the nature of the subject, that unregistered child minding vastly exceeds registered child minding.

Mr. Gerald Bermingham: The hon. Gentleman fails to take into account the fact that, if one provides facilities and allows tax relief for those who put children into child care, one creates further taxpayers because people are able to go to work. Secondly, what is his authority for making such an outrageously incorrect statement about child minding?

Mr. Stern: The hon. Gentleman is being disingenuous. I challenge any Opposition Member to deny that when we are talking about unregistered child minding, we are talking about something which, by its very nature, cannot be measured. It can only be estimated by the local authority officers who have the job of providing care. Unregistered child minding has been known to exist for many years, and tax relief cannot deal with it. In many cases, it is accompanied by a failure to declare income on the part of the child minder and I am told by social security officers that they find, when they catch up with cases involving unregistered child minders, that it is accompanied by a failure to deregister for benefits. That is one aspect of the problem that we are nowhere near tackling.
Even that aspect is dwarfed by those who bear the greatest share of child care—not workplace nurseries or registered child minders, but relatives. In countless families in my constituency, the woman or, much less frequently, the man, is able to go to work because a grandparent or another relative is prepared to care for the child without tax relief or payment but as a matter of normal family duty. I should regard it as grossly unfair if we were to give a huge tax privilege—one far beyond the purpose of the clause—to those who choose to use commercial arrangements, while not providing an equivalent incentive to those who act as families have acted for thousands of years.

Mr. Anthony Coombs: In 1980 a survey on women in employment was carried out. I should have thought that the trend of more women going to work since then has reinforced the point of the survey. It found that not only did 34 per cent. of working women use the child's grandmother as the main support for child care while at work, but 44 per cent. of full-time working mothers used grandparents and a further 13 per cent. used their husbands.

Mr. Stern: I endorse what my hon. Friend said, which underlines my point. We are talking about a limited tax relief. If we extend it to all those who lay out what one might call declarable money on child minding, we shall create a huge distortion in the market.
My hon. Friend the Member for Billericay has tabled an amendment that has been backed by a number of, one assumes, disinterested organisations such as the Institute of Directors. Although my hon. Friend and I often find ourselves in a minority in defending libertarian principles and protesting when we feel that Governments are going too far, on this occasion I am wholly in disagreement with her because what she is suggesting is nothing more than a tax farm. It will enable wealthy individuals to print alternative money in the form of child care vouchers, which inevitably in many cases will not be spent on child care, but will form another black market. There will be no way to police the way in which the child care voucher is spent, or whether it is spent on child care. I remind her of Gresham's law, which says that bad money tends to drive out good. Her amendment would create a large sum of bad money.
I welcome the clause because it will give a limited push to what, for many people, is a welcome development. That is the involvement of the employer in making it easier for particular employees to take on particular jobs. If the new tax relief works, it will be self-limiting, because it will apply only to a limited number of people in a limited number of circumstances. To go beyond the purpose of the clause would be an expensive folly with unbounded social effects. For that reason, I hope that my right hon. Friend the Minister will have no hesitation in resisting the amendment.

Mr. Beith: I am delighted to congratulate the hon. Member for Mid-Staffordshire (Mrs. Heal) on a most effective maiden speech, well prepared and well delivered. The hon. Lady's remarks showed a breadth of knowledge about the problems of the disabled which I hope that she will bring to the House on many occasions in the future. I am sure that it will not be long before she makes her second speech. My only piece of advice to her is that in some ways the second speech is more difficult than the


maiden. The indulgence of the House, which is automatic when a Member makes his or her maiden speech, disappears thereafter.
I hope that what happened to me when I made my second speech late at night does not happen to the hon. Lady. When I rose, I was mistaken by Mr. Deputy Speaker for one of my colleagues, who was sitting in the Cafeteria at the time. When his name appeared on the annunciator screen, he was presented with the dilemma of whether to enter the Chamber and make a speech or whether to continue eating his meal. That is unlikely to happen to the hon. Lady, however, as she is easily recognisable and has made such a distinctive and valuable start to her career in this place.
Child care provisions urgently need to be extended. Child care is important because women who choose to work outside the home should have the freedom to do so. I emphasise "choose" because I do not think that we should be pushing women in either direction. They should not feel pressure to work outside the home, but neither should they feel that they ought not to do so. One of the effects of the poll tax, with its joint and several liability, will be to make many married women who do not have an income feel that they must have one because they have a liability but no income. The state should be neutral and married women should have a free choice. Barriers as preventive as the lack of adequate child care should not stand in the way of women who choose to work.
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There is a crying need in the economy for the skills of many women, and that need will become greater in the next few years. That is widely recognised, and the industry has pressed strongly for amendments of the kind that I and the hon. Member for Billericay (Mrs. Gorman) have tabled. Perhaps the hon. Lady is more radical than members of the Labour party, but that comes as no surprise to me. Indeed, I have always known that to be the case. I must he careful, however, because she attacked me and others the other week for being Christians, so I know that I am in trouble with the hon. Lady already.

Mrs. Gorman: In the speech to which the hon. Gentleman refers I criticised theologians who have extreme views, not Christians.

Mr. Beith: I suggest that the hon. Lady reads the report of her speech to see how wide she appeared to range on that occasion.
A much wider child care policy needs to be established than that which can be achieved within the framework of the Bill. There must be greater support for local authority nursery provision and greater support and provision for the voluntary sector. Provision should be extended to out-of-school facilities for children. The provisions that we are discussing, which are limited, appear not to extend into that third area.
The Minister of State, Department of Education and Science took an initiative on out-of-school provision and wrote to 25,000 schools in England urging them to consider using their facilities for child care provision out of school hours. So far, the groups campaigning for this provision have found only about seven schools which have managed to make a response. That is hardly surprising, given the financial pressures that schools are facing. It will take more than a letter to 25,000 schools to deal with a

problem which will remain for many women even if all the provisions that the Government have set out in the Bill are implemented, improved and tidied up.
Children of school age must be provided for and cared for when they finish school each day and during school holidays. The provisions set out in the Bill do not meet that need. In considering successive Finance Bills, we have campaigned for wider tax relief for child care, but the Government have not provided it. We are talking today about tax relief for workplace nurseries. In that respect, the Government have given the Labour party that for which it asked. It has been given precisely that for which it campaigned.
I vividly recall a debate which took place during consideration of the 1989 Finance Bill in Committee. I was telephoned by a representative of a campaign which had been mounted for workplace nurseries and told off in no uncertain terms because I intended to raise in Committee—as, indeed, I did—the wider question of tax relief for child care. I was told that the Labour party intended to raise the issue of workplace nurseries on Report and that those responsible for the campaign did not want the matter to go any wider than that.
I pursued my amendment and the hon. Member for Islington, South and Finsbury (Mr. Smith) dealt with the issue thus:
Unfortunately, the Democrats"—
his word, not mine—
have mixed up the issue with the much broader issue of tax relief for child care expenses in general.
He was referring to nursery provision. He than said that
the new clause fails to take into account the principal mechanism whereby assistance can be given for child care, which is to ensure that good quality nursery provision by employers, local authorities and voluntary organisations is made available on a much wider scale than it is at present. Furthermore, child benefit should properly reflect the costs of bringing up a child.
Shortly after that, he said:
The new clause would use tax relief instead of dealing with those problems. Therefore, we cannot support it"—[Official Report, Standing Committee G, 22 June 1989; c. 623–4.]
The hon. Gentleman was addressing the argument that it is inappropriate to use tax relief to secure wider child care. Even the clause that we are seeking to amend uses tax relief to encourage employers to provide workplace nurseries. The crux of my argument is that the workplace nursery can never be more than an extremely limited solution to the problem of child care for working mothers. The Government's tax relief efforts must therefore be devoted to wider objectives. Even now, the official Opposition's amendments severely restrict the range of relief and, oddly, do not even relate it to the standard rate of tax, As the hon. Member for Brent, South (Mr. Boateng) said, the clause is almost unbelievably limited in its scope.
If, as I hope, the House of Commons introduces a workplace nursery for its staff—those employed by the House of Commons Commission—it is doubtful whether Members could send children to it, and it is certain that journalists, BBC staff and those who work for the Department of the Environment in this place would not be able to obtain tax relief for vouchers that their employers might provide to send children to the nursery. Even though all the employees to whom I have referred work


within this building, they would not be able to send their children to the nursery because their employers would not be providing or managing it.
That is an extreme example of the degree of restriction implicit in the clause. On the face of it, a building or set of premises used by several organisations could not have a workplace nursery used by all the organisations unless they were all fully involved in its management. That would seem to be pretty difficult nursery to run. A nursery run by the House of Commons, all its Members, the BBC and most daily newspapers in the land would be pretty difficult to run. I should not like to work for such a wide range of employers.
I have provided an extreme example, but I will move on to a more common state of affairs. Let us suppose that there are several firms on a trading estate which have factories nearby. One quite large firm might say, "We think that we could manage to operate a workplace nursery. We could probably take up half the places for our employees and we shall offer the other places to some of the neighbouring firms so that we can bring the total number of places to a reasonable level. We shall then have their support and the vouchers that they give to their employees." Such a scheme would fall foul of the narrow provisions of the clause, yet it would be a natural arrangement for several employers with premises fairly close to one another. The Government's provisions fall down even in that example of workplace nursery provision.
Even the widening to which I have spoken would not meet the needs and position of many people. There are so many employers who cannot reasonably provide child care at the workplace. There are employers who have many sites with only a few employees at each one. That is certainly true in retailing, and the same can be said of manufacturing services industries. There are firms with many employees who work in scattered locations throughout the country or even around a city, and they will be unable to make workplace nursery provision.
Small businesses with relatively few employees could not reasonably make child care provision. It would not be economical to provide the facility because they would not have enough employees to take it up. Even quite large firms—firms employing perhaps 100 people—might be uncertain about the level of take-up in any one year. The obvious solution for many firms is to look to others to help them. In this way the Government are failing to observe their philosophy, ideas and principle.
The Government propose to set up an anti-private-enterprise scheme. Let us suppose that a Government Department with many sites throughout the country wants to make nursery provision. It might decide to invite an outside catering contractor to provide services at a site where it might not be economic to run its own catering services. If the Department has a location where there are relatively few employees but where another provider could make nursery provision available, it would be unable to privatise its nursery provision. Under the Bill, it would have to manage the nursery provision itself. Given the Government's philosophy, what is the sense in saying that in the public sector the Government have to manage everything?

Mr. Bermingham: Does the hon. Gentleman agree that another spin-off is the advantage to the large organisation at the expense of the small? I always thought that the provision was meant to encourage small organisations, but it fails to do that.

Mr. Beith: That is undoubtedly so. My earlier argument was that employers with a small number of staff cannot possibly undertake the sort of workplace nursery provision that would be sustainable for a period of time. Many of them could more usefully provide tax-free vouchers to the employee, provided that they were used for registered child care or nursery education and could be redeemed only by an organisation or individual registered for that purpose.

Mr. Timothy Raison: What would be the equity of providing vouchers for those who go out to work while providing nothing for those who stay at home and look after their children?

Mr. Beith: The whole point of the argument that has run through the debate is that, in order to have the freedom to go out to work, many mothers have to provide for child care out of their taxed income. The Government are saying that they will make provision for those with child care facilities on the premises where they work without that being subject to tax. A great many other mothers will have to pay for child care out of their taxed income because the employer cannot assist them in any untaxed way. Those who choose to look after their children at home do not face that barrier.
The right hon. Gentleman may believe that the state should not become involved and that there should be no tax relief. If so, he should oppose the clause. However, once we enter that area—and there are many good social and employment arguments for so doing—we have to find a more sensible scheme. There appears to be greater equity between those who have access to workplace nurseries and those who do not than the right hon. Gentleman described.
The amendments attempt to go wider. They are all based on a voucher principle which allows child care to be provided in a wide range of locations, including domestic locations. I am worried that under Labour's proposals it would not be possible for a playgroup in an individual's home, properly registered and operating, to be the subject of vouchers provided by an employer. A skilled, trained and qualified nursery nurse looking after several young children would not qualify under the Opposition's proposal, still less under the Government's.
We must have a reasonably flexible approach because many women, especially those travelling a long way to work, will not want to take their children to some urban centre for child care. It would be more sensible and reassuring if their children were looked after in their local community by people whom they know and where there is access to neighbours and friends should anything go wrong. If a child is taken ill, a neighbour or friend could provide reassurance and take the child home for the rest of the day.
That is another example of how the workplace nursery is of limited help. It is obviously valued by those very few women, as a proportion of the total, who have access to workplace nurseries. Even where such nurseries exist, quite a few women still choose to make other child care arrangements. We must allow for them, and the


amendments are designed for that purpose. If we do not provide for them, we shall have created expectations which will not he satisfied. When the Government made their announcement, there was widespread expectation that much would be done for working women, but the provisions in the Bill will help only a few.
A number of other amendments are designed to deal with specific problems. Amendments Nos. 42 and 43 are intended to prevent two-tier standards of nursery care in workplace nurseries, and to prevent the possibility of only the directors of a small company benefiting from the facilities. That is a deliberate anti-abuse provision that we have suggested to the Government.
Amendment No. 17 has been tabled because we are puzzled about the age definition of a child. The Government say that it is 18. Do the Government envisage workplace nursery relief being extended to 15 and 16-year-olds? That is not what we understood from their previous statements. We want the Government to address the problem of out-of-school child care after 4 o'clock—after 3 o'clock at primary school level—and during school holidays.
Amendment No. 18 restricts tax relief to the basic rate, which seems to be a much more sensible use of the money. If the Government want to help those in the ordinary tax bracket, they should not subsidise nursery provision at the higher rate of tax, any more than they should subsidise mortgage relief at the higher rate of tax.
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As part of a wider child care policy, our object is to encourage employers to give a flexible form of assistance to their employees through child care. They should take account of the different needs and requirements of their staff and do whatever is possible and appropriate for them. For many small businesses, a workplace nursery is inconceivable. For many large businesses, providing child care through another organisation would be more logical than trying to develop an in-house facility. In the public sector, it is ludicrous to assume that all nursery provision must be managed by the public sector employer. The provisions are too narrow—that is why we have tabled our amendments.

Mr. Graham Riddick: I, too, join the hon. Members for Berwick-upon-Tweed (Mr. Beith) and for Bristol, North-West (Mr. Stern) in congratulating the hon. Member for Mid-Staffordshire (Mrs. Heal) on her excellent speech. It proves that there was no need for the image-makers of Walworth road to gag her as they did during the by-election.
I have come hot foot from the tennis courts, having represented this House at tennis. I am pleased to say that the Lords and Commons tennis team beat Westminster school 7–2.
I am not unsympathetic to the broadening of workplace nursery provision as suggested by my hon. Friend the Member for Billericay (Mrs. Gorman). The issue is something of a dilemma because there is a strong argument for not encouraging mothers to go out to work. There are those who argue that, while a mother has young children, her place is at home. I note that my hon. Friend the Member for Orpington (Mr. Stanbrook) agrees with that. On the other hand, there is clearly a tightening of the labour market, and the economic well-being of Britain means that we need to encourage more women to return to

the job market—certainly after their children have gone to school, but even while they are still fairly young. The answer to the dilemma is to leave the decision to each and every woman—

Mr. Andrew Mitchell: What about the husbands?

Mr. Riddick: Yes, the decision is also one for the fathers. They must have a genuine choice. The argument of many of my hon. Friends is that the free market should cater for the increased demand for more women to return to work. I have no doubt that, if we left that to the free market, there would be a much greater provision of workplace nurseries—but in time. I do not argue against the use of tax relief to encourage desirable or important objectives. We have used tax relief to encourage home ownership, occupational pensions and so on. Therefore, why should not it be used to encourage women to return to work if they so wish?
I welcome the tax relief announced by the Chancellor of the Exchequer in his Budget speech, but if we are to introduce tax relief for workplace nursery provision, we should do it properly. The provision in the Bill is very restrictive.
A firm in my constituency, Shaws Pallets, which is based in Slaithwaite, a village in Colne valley, has drawn my attention to a problem. The company has set up a workplace nursery to cater for the children of its employees. It wishes to offer places to employees of other companies in the village. However, the tax relief to be made available through the Bill will not extend to employees of other firms. There is a case for such an extension. The Treasury is discriminating against people whose firms cannot afford to set up a workplace nursery.
I have had a letter from the Retail Consortium; no doubt other hon. Members also received a copy. Many retailers need to encourage more women to go back to work. The Retail Consortium makes the point that the Government are discriminating against small stores that cannot provide the facilities which are required, and that there is very little flexibility in the provision for tax relief.
We should not be too niggardly. There is a sound argument that there is no need for the Government to introduce the provision at all and that we should leave it to the free market. If we are to introduce tax relief, the Government should make it meaningful and ensure that the proposal works. That is why I support my hon. Friend the Member for Billericay. I hope that my right hon. Friend the Chief Secretary will consider the matter again and take up the proposal in the amendment tabled by my hon. Friend.

Mr. Bermingham: A short time ago the hon. Member for Bristol, North-West (Mr. Stern), who is not in his place, gave way to me; I asked him a simple question when he accused the Labour party of producing a proposal that would cost much money. He spoke in his usual accountancy terms. I never trust accountants because they can make figures tell anything they want. The hon. Gentleman forgot to say that the minute someone is allowed to exercise the economic right to go back to work, because the amount involved in child minding can be deducted as a tax expense, two more taxpayers and two more jobs have been created. The person going back to


work will pay tax and the person who is being employed to mind the child will also pay tax. That figure has to be offset against tax relief.
Some years ago I read that, unless more people went to work, the gross national product would not grow. If there is a demographic profile, as there is in this country, of a reducing number of young persons entering the labour market and an increasing number of people leaving it through retirement, there will be fewer persons in the labour market. If we want to keep up the number in the labour market, thus enabling us to pay for the pensions and other benefits that we all want, we have to encourage people to go back to work. We have a massive waste of skills because married women who want to go back to work cannot afford to do so. It is no good a woman earning £50 in a part-time, shared job if it is going to cost her £40 or £60 to have her children looked after. That is lunacy.
Apart from the fact, so I understand, that women's need to go back to work is increasing, and people want to do it, they do not want to be stuck at home seven days a week with the children. My brother-in-law, who is a doctor, tells me that much of the stress and trouble within families is caused because the mother is housebound and cannot get out to work. She feels frustrated because she has so much to offer society but is denied the opportunity to do so.
The Government once again demonstrate their tunnel vision. I shall be glad when the channel tunnel is finished; we could put all the Treasury Ministers in it to show them what a real tunnel is like. They could go through it, blinkered as ever. Treasury Ministers are blinkered in their proposals in clause 20. Under the clause the employees of a big company that can provide a workplace nursery will get tax relief, but if a little company, a profession or a shop is not big enough to have its own workplace nursery, the employees will not get any tax relief. That is lunacy.
What are we doing? Once again we are saying to small businesses, "Yah-boo, tough, the Treasury does not understand your problems; you cannot compete with the big boys." We want the little businesses to prosper, but that is not the view of the Treasury. Treasury Ministers cannot see further than the end of their noses. The hon. Member for Colne Valley (Mr. Riddick) has given a classic example. The position is the same in St. Helens. The big companies such as Pilkington's will be able to provide workplace nurseries, but the little factories, particularly in the clothing trade, which desperately want machinists, cannot afford them. It takes many years to teach machinists their skills. The factories want them back, but they cannot encourage them because they cannot compete with the big boys in the provision of workplace nurseries.
If the Minister—I am sorry, I mean the Chief Secretary; I have demoted him again, but that is one of my bad habits —thought of the interests of the economy generally, he would broaden the provision to enable women to go back to work. If women could employ people to act as child minders, or if they could put their children in workplace nurseries or in nurseries provided by local authorities, the labour market would increase enormously. My hon. Friend the Member for Durham, North-West (Ms. Armstrong) told us about a local authority laying on a wonderful child minding scheme.
If the provision was widened, it would pay for itself in due course. There would be another spin-off benefit. As soon as tax relief is claimed, the Inland Revenue knows to whom the money has been paid. What an easy way to get rid of unauthorised child minders. The Inland Revenue would tell the local authority immediately if a person was not registered. The Inland Revenue is like that; it will snitch on anybody at any time. The Chief Secretary would do a wonderful job by getting rid of unauthorised child minders. They would pop out of the woodwork all over the place. The Chief Secretary would improve the standard of child care.
The Government have an opportunity to do something, but they will not take it. They never do. It will be the same with capital gains tax later this evening. Once again the Government cannot see beyond their tunnel vision. What a pity. They could do so much good if they listened to the voices of all hon. Members on both sides of the House.

Mr. Ivor Stanbrook: I hope that the House will forgive me having been absent during part of the debate. I am totally opposed to the amendments and I believe that the Government's attitude towards the problem of working mothers is wrong. When my hon. Friend the Member for Billericay (Mrs. Gorman) proposed her ten-minute Bill recently to assist mothers of young children to go out to work, I was appalled at her apparent repudiation of traditional Conservative values with regard to the family. Therefore, I opposed her Bill. She was successful, and all I got for my pains was personal abuse from her, gratuitous insults from another lady Member of Parliament, and vitriolic attacks in the press. I also received many letters. I was, however, convinced of the support for my views by the many letters of support I received and by the guilt implicit in many of the letters which criticised me.
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Fortunately, I have obtained greater wisdom from that experience because it revealed to me the true nature of the evil which lies at the root of our industrial and social policies. It also helps to explain why we British have been so unsuccessful in running our economy since the war and why we, unlike our continental competitors, have weathered the 1987 economic storm so badly. It is due to the attitude that I speak of which is inherent in my hon. Friend's amendments.
Over the past 30 years or more, under Governments of both major parties, we have become addicted to the notion that happiness lies in "doing your own thing". Never mind obligations to others, to the children we have brought into the world, to the person to whom we made our marriage vows or to elderly parents; all that matters is self-fulfilment, and the yardstick of success is material reward.
The addiction affects the whole of society, all classes of people and both sexes. Feminists in particular think of the family unit and child rearing as oppressive. Getting women into the labour force is the weapon which gains the independence they desire for their sex. They have succeeded to an extent that no one thought possible 30 years ago. We now have a continuously expanding labour force in Britain, and the expansion is provided mostly by married women. We positively encourage married women, including mothers of very young children, to go out to


work. The Government have joined in the rush and the amendments tabled by my hon. Friend the Member for Billericay are designed to help it along.
There are now twice as many mothers in the labour force, proportionately, in this country than there are in any of our continental competitors. Does that improve our productivity? Of course not. As we have a larger labour force, we think that we can tolerate the inefficiency and overmanning of our industries. In Europe they know better They have far fewer married women in employment. They positively encourage the mothers of young children to stay at home with them. The average male worker in Europe is paid more and produces more than his British counterpart because their economies are based on increasing productivity and are not dissipated on a growing labour force.
For many people we have made it necessary for there to be two or more incomes coming into the household. We have disastrously tipped the fiscal balance against the traditional family. Most working mothers are forced to go out to work out of economic necessity. It is not their fault. Their husbands are not earning enough to provide for all the needs of the family. In fiscal terms we have put enormous obstacles in the way of a family which seeks to give its children the security and love derived from the presence of the mother.
We are still committing that error in the clause we are debating. Instead of the old rule which made the breadwinner responsible for the household rates, we have substituted a system which requires the mother to pay a contribution towards local public service charges even if she is not in paid employment and has no resources of her own to pay the community charge. The community charge. if it is not modified, is likely to break up more families.
There have been 30 years of progressive fiscal neglect of the family. My original objection to the proposal by my hon. Friend the Member for Billericay was expressed in inadequate terms because it was based on only half of the truth. Never mind the social consequences of a generation brought up without love or a sense of obligation to others; never mind the unhappiness caused to children by our policies. Think only of the damage that we are doing to the economy by solving our labour problems in such a way.
One of my correspondents, Mrs. Annemieke Lines, told me:
Redressing the fiscal balance in favour of those bearing the responsibility of bringing up the next generation will do far more to persuade young mothers to look after their children than outright condemnation for not doing so".
I accept that.
The Government have completely the wrong approach to this problem. My hon. Friend is completely off-beam in her amendments, and I hope that they will be rejected. I implore the Government to delve more deeply into the economic and social consequences of what they are doing and to cease to be pulled along by the wretched engine of feminism.

Ms. Armstrong: I am grateful for the opportunity to speak in this debate, not least because I speak shortly after my hon. Friend the Member for Mid-Staffordshire (Mrs. Heal), who made a measured but powerful speech. I hope that some hon. Members who criticised her as a candidate will take note of the content of her speech and her performance, and will recognise that we all say things in

by-elections and at election time that we regret later. I hope that some hon. Members regret some of the things that they said during the Mid-Staffordshire by-election.
The hon. Member for Orpington (Mr. Stanbrook) has just spoken and I follow him with a sense of great sadness. He seems to have no understanding of the power of relationships in which people who both work are capable of loving their children. To listen to him one would think that it was impossible for fathers to take any part in their children's upbringing, care and nourishment because they go out to work.
Both my parents worked and contributed to society, but they brought me up never to put myself first and always to think of my responsibilities in the public domain. They did that while they worked, and I know that I am not alone in the House or in the country in having benefited from parents who were able to give to other people and therefore had more to give to the family. I am sad that the hon. Gentleman does not understand the contribution that working parents are able to make to the family.
The dilemma expressed by the hon. Member for Orpington has also hit the Government because in so many of their words and actions over the past year they have demonstrated that they cannot come to terms with the fact that work and the family go together. The Government need to sort out their policies to support that ideal rather than causing contradictory problems. It is significant that this is the only Government-inspired debate in which we have the opportunity to talk about child care. That demonstrates the narrowness and the poverty of the Government's understanding of issues which face us today.
If the Government had a coherent strategy on child care, or accepted the need for one, the abolition of the workplace nursery tax would be but a marginal part of their policy. I do not know where the hon. Member for Orpington got his figures on the number of married women in Europe who go out to work. They certainly do not match up with any figures for European Community countries. The EC report on child care shows that we lag behind in our provisions for children and for parents who wish to work.

Mr. Stanbrook: Can the hon. Lady deny that fewer married women go out to work in Europe than in Britain? The Government make play of the fact that our labour force is increasing all the time, all because of the increased employment of married women.

Ms. Armstrong: In France, Germany, Italy and Spain that is not the case, but the hon. Gentleman may have figures which confound those from the EC. Britain comes near the bottom of the league when it comes to mothers with young children who are able to work. We have more women out of the work force for longer than most of our European competitors, and when they do return they do so at a lower level both in terms of status and pay. The main reason that is given for that is lack of adequate child care. During that time we are wasting the money that we have invested in their training, their experience and the commitment that they wish to make. It is for those reasons, if for no other, that we need more adequate child care facilities.

Mr. Humfrey Malins: Will the hon. Lady give way?

Ms. Armstrong: No. The hon. Gentleman has only just come into the Chamber and we have been debating the matter for the past three hours.
The Government are prepared to tackle child care only with this minimal measure and, while that continues to be the case, we shall not be able to give our children the sort of start that they need. I hope that the hon. Member for Orpington will recognise that throughout the continent children have better opportunities than they have here. I was in Barcelona last weekend at the European child care network conference and few there were struggling in the way that the British delegation was with inadequate, patchy, mixed and poorly regulated provisions.

Mr. Malins: Will the hon. Lady give way?

Ms. Armstrong: No.
It is clear that other members of the Government have had different views of the tax. The right hon. Member for Sutton Coldfield (Sir N. Fowler), speaking on the imposition of the workplace nursery tax after his resignation, said:
It is an eccentric policy and indeed up to April 1984 it was not policy at all. For almost 40 years the positon had been that no one had paid tax on the benefit from a workplace nursery. The policy was then changed on the view that tax had always been payable but had simply not been collected. We are now left in the extraordinary position that a motorist who has free parking at his place of work in central London does not pay tax on this undoubted benefit, while a mother who makes use of a workplace nursery does. It is time that this curious policy was taken away and put out of its misery.
I agree with the right hon. Gentleman, but he did not make his views known when he was a member of the Cabinet.
The Government's proposal is narrow. It is a small gesture which is an inadequate response to our needs or demands. However, I counsel and caution those who argue that tax relief should be the main way in which we extend our child care provisions. The experience of most countries is that that means has dismally failed. It has not served as a lever to increase the numberof places nor to maintain quality.
The Opposition are determined to increase opportunities for child care but we shall ensure that they are of the highest quality. There is no point in opening up the provision of child care of a dubious quality only to have to deal with the problems that that creates later. We have to make sure that it is of the highest quality, and that is why the Opposition have argued for a partnership among the public, voluntary and private sectors.
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Employers have a responsibility to contribute to child care provision, but it is the responsibility of all society to ensure that it is of the highest quality. I commend to the House those local authorities who, despite the Government, have been trying hard to ensure that they can develop such partnerships. I shall be attending the launch of such a partnership in north Tyneside on Monday. There the local authority, despite being capped by the Government, is trying its hardest to meet the needs of the economy and of children.
If the Government are serious about the changes in the Bill, I urge them to look much further. Some of the Opposition's amendments give a lead in terms of fiscal policy, but none of my hon. Friends would pretend that fiscal policy can sort out the problems. We now have the

opportunity to create a completely new relationship between work and the family in which women have the right to work, to train and to gain experience.
If we develop a proper work and family policy, we shall develop opportunities for fathers to be much more crucially involved in child care and to play their part in it. That is what people are looking for. It is a popular policy wherever I go. I urge the Minister to talk to his colleagues in the Cabinet and to ensure that we have a comprehensive child care policy which will address the needs of children and of men and women who happen to be parents.

Mr. Andrew Mitchell: I shall not detain the House for more than five minutes because many of the points that I wanted to make have already been made. But it would be remiss of me not to start by congratulating the hon. Member for Mid-Staffordshire (Mrs. Heal) on her maiden speech. I too had the pleasure, along with many of my colleagues, of visiting her constituency recently. Her eloquent and elegant comments, particularly about the role and the position of the disabled in society, were well made and I hope that we shall hear more from her on that subject in future.
When one strips away the political hoo-hah, there is a wide measure of agreement on the Back Benches on both sides of the House about the direction in which the Government should move in future. It is a pity that the Government have not been given more credit for introducing tax relief for workplace nurseries. It is a major step forward, which I welcome. It is right to make it clear at the start that the Government deserve credit for that.
I declare what must at least be described as a tangential interest as the husband of a highly qualified member of the medical profession. That experience leads me to believe that while I agree with much of what has been said by almost every hon. Member who has spoken, I find little to agree with in the speech made by my hon. Friend the Member for Orpington (Mr. Stanbrook).
I, along with most of my hon. Friends, incline to the view that we should have what has come to be known since the early 1980s as a level playing field with regard to the spending of taxpayers' money and should try to strip out as many tax reliefs as possible. But let us be frank. We recognise that in some cases such as mortgage tax relief there is a political imperative and in others, such as with pensions, there is an economic and political imperative, which encourage us to produce such a tax distortion. That is the argument that the Treasury accepted when it introduced tax relief for workplace nurseries. I welcome that, but we should accept that whether or not it is a good thing to have such tax reliefs is a pass which has now been sold. The Treasury—and I agree—has expressed the view and put it into legislation that we should have them. There are personal, economic and political gains to be had from that.
There is the possibility of a tremendous economic gain. In the part of the country that I represent, we are facing a 40 per cent. reduction in the number of school leavers. We desperately need to encourage women back into the workplace. Frequently, people come to my surgeries and tell me how much they pay for child care, and what they earn from a part-time or even a full-time job; often the difference is very narrow. This is an important measure, and I hope that the Treasury keeps its effect under review in the light of what will happen this year.
The knitwear industry, which is a major industry in the part of the world that I represent, will benefit significantly from the Bill. There is also the question of personal gain. Conservatives believe in extending choice and opportunity, and the Bill will do that. Many women do not want to go out to work, but prefer to stay at home and look after the children; others are better mothers because they go out to work. There are no black-and-white rules.

Mr. Graham Allen: Will the hon. Gentleman give way?

Mr. Mitchell: No; my time is very limited.
Having made those points of principle, I shall now deal briefly with some specific points. I hope that Treasury Ministers will consider whether the Bill may prove too restrictive. There is some discrimination—as my hon. Friend the Member for Billericay (Mrs. Gorman) pointed out—against small businesses and smaller employers, who will not have the time or the wherewithal to support the necessary operations that are enshrined in the Bill. It is important for us to keep under review whether its reach is sufficient.
The hon. Member for Berwick-upon-Tweed (Mr. Beith) referred to premises being made available by employers, and a number of amendments address that point. A firm's staff may be spread around a city, and it is impractical to expect staff to bring their children to a central workplace nursery: they will not do it. I agree with the suggestion that employers should be allowed to buy space in creches or nurseries established by third parties, and I endorse what my hon. Friend the Member for Billericay said about a voucher system. We should consider the possibility of employers paying a third party direct. Creche facilities and child minding services are often provided in accommodation that may have been converted or adapted, but is still primarily occupied for domestic use. I hope that my right hon. Friend the Chief Secretary will bear it in mind that the need for specialist creche or nursery facilities as opposed to domestic accommodation is not an easy case to pursue.
In the Bill, care is defined to exclude
supervised activity provided primarily for education purposes".
While I do not advocate a system that allows private education to be provided in the guise of child care, surely we should not prohibit the provision of pre-school education as part of those child care facilities. The line between supervised activity —as defined in the Bill—and education is difficult to draw in practice. Children may be taught to read and write at nursery; will that be disqualified by the Bill? I hope that my right hon. Friend will consider that point—if not today, perhaps in the future.
The clause is a major step forward. It is a pity that Opposition Front Benchers did not give the Government more credit for listening to what many hon. Members have said. I hope that my right hon. Friend will keep the operation of the clause under review, and consider whether next year we need to go further.

Mr. Norman Lamont: This has been a lively debate. It could hardly have been otherwise, with contributions from my hon. Friend the Member for Billericay (Mrs. Gorman) and from the hon. Member for Brent, South (Mr. Boateng). We all understand why the hon. Member for

Brent, South has had to leave the Chamber repeatedly during this debate; we regret that, and sympathise with him and with his constituents.
Let me join other hon. Members in congratulating the hon. Member for Mid-Staffordshire (Mrs. Heal). Everyone who heard her maiden speech will agree that it was outstanding. It was not only confident, eloquent and authoritative but extremely knowledgable, and it demonstrated that the disabled and mentally ill have recruited a powerful ally. All Conservative Members also appreciated her generous tribute to John Heddle.
The hon. Member for Brent, South made a robust attack on the Government. Although it was an attack, he was right to identify many conflicting considerations and genuine dilemmas. I shall explain the Government's philosophy and approach, which—as the hon. Gentleman rightly said—is different from the approach that we adopted in last year's Finance Bill.
My hon. Friend the Member for Gedling (Mr. Mitchell) was right to say that we must bear in mind not only the Bill's social consequences but the consequences of our taxation policy. It is the Government's philosophy—and their repeated intention—to broaden the tax base, and whenever possible to limit the use of special reliefs. It is true that we have made special exemptions where we considered that appropriate. However, on the whole the cost of those reliefs has been modest. In general, our aim has been greater neutrality and a broader tax base, with lower rates and limited reliefs. Some of the proposals made in the debate would involve large amounts of money—perhaps not as an immediate consequence of the amendments, but they would be likely to move the boundaries of relief further away.
My hon. Friend the Member for Bristol, North-West (Mr. Stern) accurately summed up the purpose of the Budget changes. The hon. Member for Brent, South frequently used the word "largesse". I am not sure that Conservative Members have used it in relation to the amendment. My hon. Friend the Member for Bristol, North-West rightly stressed that the clause was not intended as a step towards a general child care allowance. We have never claimed that. The hon. Member for Berwick-upon-Tweed (Mr. Beith) repeated his request for a general child allowance, extending to child care in the home, but I do not agree with that in principle, and it would also be extremely expensive. It was never our intention, and it is not what the changes were designed to achieve.
Familiar points about tax policy were implicit in the speech of my hon. Friend the Member for Gedling. We do not want employers to be able to formulate tax-efficient remuneration packages; by and large, we want people to be remunerated in cash. We want fewer benefits in kind. That has been the idea behind many of our changes—for instance, the taxation of company cars.
My hon. Friend the Member for Orpington (Mr. Stanbrook) made his views clear, as he has done before. The Government's view is that the tax system should be neutral: it should be left to individuals to decide whether they wish to work or to stay at home with their children. I do not think that that neutrality is substantially compromised by this limited change. My hon. Friend the Member for Bristol, North-West emphasised that the change is limited.
The hon. Member for Brent, South asked why we were making the change. There are several reasons. First, it was


put to us repeatedly that employers found it troublesome to continue assessing and reporting to the Inland Revenue the value of day nurseries. Secondly, it was argued that the burden on industry was an effective deterrent to the development of workplace nurseries. It was also argued repeatedly in the House that there was some resentment about the tax treatment of workplace nurseries. We have made a limited change, putting the tax treatment of workplace nurseries very much in line with that of other benefits in kind. For example, there is a tax exemption for workplace canteens that are provided on the premises. The treatment of workplace nurseries is broadly analogous to those limited concessions.
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In the Budget and in the Bill we have done exactly what the Labour party asked us to do when we debated the Finance Bill last year. Benefits in kind are extremely complicated and it is difficult to draw boundaries. There are only two ways of achieving a policy that does not create anomalies. One is to have no relief whatsoever, and the other is to go to the extreme proposed by the hon. Member for Berwick-upon-Tweed and have relief for all the costs of child care, including child care at home. That would be enormously expensive and would carry a heavy dead weight cost.

Mr. Beith: I should like to get the definition right. I referred not to all the costs but to the costs incurred in all kinds of child care.

Mr. Lamont: I accept the correction, but the costs would still be huge, and would carry a large element of dead weight.
The hon. Member for Brent, South pointed out the irony that last year I resisted precisely what we have done in this year's Budget. I have had it quoted back to me that I said that if we moved a small way we would create a great deal of pressure for much more relief. Looking at the 20 amendments that have been tabled, I realise that all the arguents I used last year were not exactly lacking in force. None the less, it is right that we are making a small, limited change and it is equally right that it should be ring-fenced.
The hon. Member for Berwick-upon-Tweed referred to amendment No. 41, which proposes that any contribution by an employee to the cost of a nursery place provided for by an employer shall be deductible for tax purposes. It would be difficult to concede that principle in addition to the concession that we have already made that it would not be assessable to tax as a benefit. It would create a clear unfairness against those who were paying their own child care costs and did not have the benefit of a workplace nursery. To do that on top of the concession we have already made would exacerbate that unfairness.

Mr. Raison: My right hon. Friend has been making an extremely good speech directed against his own proposals. He has argued the case against tax relief on benefits in kind; he has argued that as a matter of general policy we should not be looking for more tax relief, especially when they give particular benefit to those who are better off. He also said that he sought equal treatment. How can one possibly say that there is equal treatment if one provides tax relief to those who are earning money yet provides

nothing for those families in which the mother stays at home to look after her children? It appears to me to be a fundamentally unequal proposition.

Mr. Lamont: As I have tried to explain, we have made an extremely limited concession at a cost of some £10 million. It is precisely analogous to the way in which we treat certain other benefits in kind and communal facilities such as sports facilities and canteens which are provided on the employer's premises. Only in those circumstances are they exempt from tax. That is already built in to our policy on the taxation of benefits in kind. I do not think that what we have done is markedly out of line with the treatment of other benefits. That is why we can make a limited move in that direction.
The hon. Member for Brent, South also talked about amendments Nos. 8 and 9. The hon. Member for Berwick-upon-Tweed and my hon. Friend the Member for Colne Valley (Mr. Riddick) were concerned about small companies. Under the Bill it is possible for people to share in the provision of nurseries. They have to share in the financing and the management of them. We shall see whether we can clarify that in some document, but it is not intended that the management responsibility should be onerous. It would be quite sufficient for the company to monitor the performance of the nursery and to be represented on the management committee; it does not mean it would have to be involved in its day-to-day management, nor does finance have to be provided in equal proportions between the partners. It will be possible for firms to collaborate.
In the interests of saving time, perhaps I could write to the hon. Member for Berwick-upon-Tweed. I can assure him that the anxieties he expressed about companies getting together and about the BBC participating in a facility in this building are not well grounded, but I shall write to him and explain why. I shall also write to my hon. Friend the Member for Colne Valley. It will be possible for companies to operate as a group and for small companies to participate in such schemes.
My hon. Friend the Member for Billericay spoke to amendments Nos. 25, 26 and 27 with her customary verve and exuberance, and we all very much enjoyed listening to her. Amendment No. 25 seeks to insert a new provision into the Income and Corporation Taxes Act 1988 so that child care provided for an employee, including vouchers, cash allowances and reimbursement of expenses, would be exempt from taxation as a benefit in kind. I was rebuked by my right hon. Friend the Member for Aylesbury (Mr. Raison), but that really would drive a coach and horses through the tax system. We do not give people relief for vouchers except to a de minimis amount for meals or for travel. There is no limit to the number of things for which people might claim the reimbursement of expenses or a voucher for the purchase of a benefit. They might claim that any important purchase should be exempt from tax. Apart from the objection made by my hon. Friend the Member for Bristol, North-West, that would be difficult to police.
My hon. Friend's amendment shifts the relief much more in the direction of a general child care allowance. It would be much more difficult to defend the new boundary line if employers were allowed to remunerate bought in nursery care and it would be easy to ask why employers should not fund child minders. It would be extremely difficult to draw that distinction.
I am well aware that my hon. Friend wants there to be a general child care allowance, so perhaps she will forgive me if I am a little suspicious of why she proposes pushing the boundary only so far, leaving me a little anxious that it will be difficult to resist her next campaign. That applies equally to amendment No. 27.
In amendment No. 26, my hon. Friend comes a little way towards meeting us because she proposes the conditions that child care should not be provided at the residence of the child. But in doing that she is in slight danger of creating another anomaly, because employer funding of a nanny at a person's home would be excluded, but if a child was left at a child minder's home elsewhere that would be covered. That would be a very difficult boundary to defend. The cost of what my hon. Friend and other hon. Members have been proposing might be relatively small in the first few years, but it would gradually build up and, if it became more like a child care allowance, it would involve a significant sum of money. A general child care allowance would certainly cost hundreds of millions of pounds.
The amendments underline the fact that there is no logical stopping point in the debate; it is extremely difficult to draw the line. We have made a modest, limited amendment. I have tried to explain the reasons for making it, and I believe that it will make life a little easier for some employers. There is little tax revenue at stake. The amendment that we have made accords with the general policy on the taxation of benefits in kind. It is a limited change, and it will do a modest amount of good. In that spirit, I commend the clause to the House and urge it to reject the amendments.

Mr. Boateng: I thank the Chief Secretary and hon. Members for their forbearance when I had to leave the Chamber. There has been a deplorable, murderous attack on a soft target in Wembley surrounded by civilians' homes and people going about their ordinary business. That attack was futile and mindless, and those who perpetrate such attacks will not succeed in their objectives. On behalf not only of my constituents but of the whole House, I thank the police and ambulance services for their sterling work in dealing with the deceased and injured.
The debate has demonstrated the almost schizophrenic nature of the Conservative party on this issue. We heard from that tendency within the Conservative party which is geared to the philosophy of kinder, küche, kirche. They are concerned that women should remain with their children by the hearth and in the church. They see no role for them in the wider world. That philosophy is epitomised by the hon. Member for Orpington (Mr. Stanbrook), and it is alive, well and flourishing in the Conservative party.
There is the hard-line tendency, ably demonstrated by the Chief Secretary, who was almost dragged to the Dispatch Box to make the concession announced by the Chancellor, presumably against the Chief Secretary's best advice, in the Budget. That is why the Chancellor talked of a small measure and said:
We have always made it clear that it is not for the Government to encourage or discourage women with children to go out to work. That is rightly a decision for them to take, and one in which the Government would be wise not to interfere."—[Official Report, 20 March 1990; Vol. 169, c.1020.]

The Financial Secretary to the Treasury (Mr. Peter Lilley): Hear, hear.

Mr. Boateng: I hear the Financial Secretary say, "Hear hear." The erstwhile Secretary of State for Employment, before he returned to the bosom of his family, declared the 1990s to be the decade of the working woman.
Conservative Members must decide which of those tendencies they will adhere to—the recidivist, atavistic tendency of the hon. Member for Orpington, the monetarist tendency, which is in its last gasps, of the Chief Secretary or the more benign tendency of the former Employment Secretary, whose banner was well taken up by the hon. Member for Gedling (Mr. Mitchell), and who deserves a word of praise. He erred—the Chief Secretary will know this—in expecting Labour Members to say "thank you" for this measure, because in 1984, where this aberration has its origins, the Conservative party agreed that it was better to put those who seek to obtain a company car in a preferential position compared with those who seek to obtain and use a workplace nursery. Conservative Members—and the Chief Secretary encouraged them—were responsible for elevating a Porsche above Petula and Patrick. That is the reality—the Porsche comes first, and let Petula and Patrick's parents take care of them.
The Government have changed a bit, but they have not changed enough. That is why we intend to press amendment No. 9, which deals with our most modest request—that employees, particularly those employed by small companies, have the option to attend community nurseries, voluntary nurseries or local authority nurseries if that is what they decide. That is in accordance with the reality of the demand and the spirit of the Bill.

Mr. Riddick: Will the hon. Gentleman give way?

Mr. Boateng: No, I am afraid that time is too short.
I must take to task the hon. Member for Bristol, North-West (Mr. Stern), who suggested that amendment No. 41 is profligate. "How much would it cost?" came the cry, as though we were about to take billions from the Treasury. If the hon. Gentleman looks in a little more detail at amendment No. 41—I know that he will give it his attention, if not now, in due course—he will find that it is strictly limited to workplace nurseries, bearing in mind the strictures of the Chief Secretary. Any contribution made by the employee will become taxable in the employer's hands. The employer may pay tax at 35 per cent. while the employee pays tax at 25 per cent. in these circumstances, there is a net gain to the Treasury. What could be more prudent, more moderate or more in tune with the correct degree of fiscal rectitude than that? It is indeed a modest amendment.
If there were any justice or any truth in Conservative Members' approach to these matters, they would accept amendment No. 41. If they cannot do so, we say that they should accept amendment No. 9. Let them do something for the kids, something for employers who are seeking to expand the pool of skilled labour on which they might usefully draw, and something for the working women and parents of this country, because—let us make no bones about it—the Government may do nothing now but we shall do something soon and we shall do a great deal.

The Chairman of Ways and Means (Mr. Harold Walker): Do I understand that the hon. Gentleman will seek to divide the House on amendment No. 9 and that he will therefore seek to withdraw amendment No. 41?

Mr. Boateng: Yes. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 9, in page 11, line 27, leave out from 'persons' to end of line 30.—[Mr. Boateng.]

Question put, That the amendment be made:—

The Committee divided: Ayes, 176, Noes 259.

Division No. 211]
[7.16 pm


AYES


Abbott, Ms Diane
Flannery, Martin


Allen, Graham
Foot, Rt Hon Michael


Alton, David
Foster, Derek


Anderson, Donald
Foulkes, George


Archer, Rt Hon Peter
Fraser, John


Armstrong, Hilary
Fyfe, Maria


Barnes, Harry (Derbyshire NE)
Galloway, George


Barnes, Mrs Rosie (Greenwich)
Garrett, John (Norwich South)


Barron, Kevin
Garrett, Ted (Wallsend)


Battle, John
Gould, Bryan


Beckett, Margaret
Graham, Thomas


Beith, A. J.
Griffiths, Nigel (Edinburgh S)


Benn, Rt Hon Tony
Griffiths, Win (Bridgend)


Bermingham, Gerald
Grocott, Bruce


Bidwell, Sydney
Heal, Mrs Sylvia


Blunkett, David
Healey, Rt Hon Denis


Boateng, Paul
Hinchliffe, David


Boyes, Roland
Hoey, Ms Kate (Vauxhall)


Bradley, Keith
Hogg, N. (C'nauld &amp; Kilsyth)


Brown, Gordon (D'mline E)
Home Robertson, John


Brown, Nicholas (Newcastle E)
Hood, Jimmy


Brown, Ron (Edinburgh Leith)
Howells, Dr. Kim (Pontypridd)


Bruce, Malcolm (Gordon)
Hughes, John (Coventry NE)


Buchan, Norman
Hughes, Robert (Aberdeen N)


Buckley, George J.
Hughes, Roy (Newport E)


Caborn, Richard
Johnston, Sir Russell


Callaghan, Jim
Jones, Barry (Alyn &amp; Deeside)


Campbell, Menzies (Fife NE)
Jones, Martyn (Clwyd S W)


Campbell, Ron (Blyth Valley)
Kaufman, Rt Hon Gerald


Campbell-Savours, D. N.
Kennedy, Charles


Carlile, Alex (Mont'g)
Kinnock, Rt Hon Neil


Cartwright, John
Kirkwood, Archy


Clark, Dr David (S Shields)
Leighton, Ron


Clarke, Tom (Monklands W)
Lestor, Joan (Eccles)


Clay, Bob
Lewis, Terry


Clelland, David
Litherland, Robert


Clwyd, Mrs Ann
Livingstone, Ken


Cohen, Harry
Livsey, Richard


Cook, Frank (Stockton N)
Lloyd, Tony (Stretford)


Cook, Robin (Livingston)
Loyden, Eddie


Corbett, Robin
McAllion, John


Corbyn, Jeremy
McAvoy, Thomas


Cryer, Bob
McFall, John


Cummings, John
McKelvey, William


Cunliffe, Lawrence
McLeish, Henry


Cunningham, Dr John
Maclennan, Robert


Dalyell, Tam
McWilliam, John


Darling, Alistair
Madden, Max


Davies, Rt Hon Denzil (Llanelli)
Mahon, Mrs Alice


Davies, Ron (Caerphilly)
Marshall, David (Shettleston)


Dewar, Donald
Marshall, Jim (Leicester S)


Dixon, Don
Martin, Michael J. (Springburn)


Dobson, Frank
Martlew, Eric


Doran, Frank
Meacher, Michael


Dunnachie, Jimmy
Meale, Alan


Dunwoody, Hon Mrs Gwyneth
Michie, Bill (Sheffield Heeley)


Eadie, Alexander
Mitchell, Austin (G't Grimsby)


Eastham, Ken
Molyneaux, Rt Hon James


Evans, John (St Helens N)
Moonie, Dr Lewis


Ewing, Harry (Falkirk E)
Morley, Elliot


Ewing, Mrs Margaret (Moray)
Morris, Rt Hon J. (Aberavon)


Fearn, Ronald
Mowlam, Marjorie


Field, Frank (Birkenhead)
Mullin, Chris





Murphy, Paul
Smith, C. (Isl'ton &amp; F'bury)


Oakes, Rt Hon Gordon
Smith, Rt Hon J. (Monk'ds E)


O'Brien, William
Smith, J. P. (Vale of Glam)


O'Neill, Martin
Soley, Clive


Orme, Rt Hon Stanley
Spearing, Nigel


Parry, Robert
Steel, Rt Hon Sir David


Patchett, Terry
Steinberg, Gerry


Pendry, Tom
Strang, Gavin


Pike, Peter L.
Straw, Jack


Powell, Ray (Ogmore)
Taylor, Mrs Ann (Dewsbury)


Primarolo, Dawn
Taylor, Matthew (Truro)


Quin, Ms Joyce
Thompson, Jack (Wansbeck)


Radice, Giles
Turner, Dennis


Redmond, Martin
Wallace, James


Rees, Rt Hon Merlyn
Warden, Gareth (Gower)


Reid, Dr John
Wareing, Robert N.


Richardson, Jo
Welsh, Andrew (Angus E)


Robinson, Geoffrey
Wigley, Dafydd


Rogers, Allan
Williams, Alan W. (Carm'then)


Rooker, Jeff
Wilson, Brian


Ruddock, Joan
Winnick, David


Sedgemore, Brian
Wray, Jimmy


Sheerman, Barry
Young, David (Bolton SE)


Sheldon, Rt Hon Robert



Short, Clare
Tellers for the Ayes:


Skinner, Dennis
Mr. Frank Haynes and


Smith, Andrew (Oxford E)
Mrs. Llin Golding.




NOES


Adley, Robert
Clark, Dr Michael (Rochford)


Aitken, Jonathan
Clark, Sir W. (Croydon S)


Alison, Rt Hon Michael
Clarke, Rt Hon K. (Rushcliffe)


Amery, Rt Hon Julian
Colvin, Michael


Amess, David
Conway, Derek


Amos, Alan
Coombs, Anthony (Wyre F'rest)


Arbuthnot, James
Coombs, Simon (Swindon)


Arnold, Jacques (Gravesham)
Couchman, James


Arnold, Tom (Hazel Grove)
Davies, Q. (Stamf'd &amp; Spald'g)


Atkins, Robert
Davis, David (Boothferry)


Atkinson, David
Day, Stephen


Baker, Rt Hon K. (Mole Valley)
Dickens, Geoffrey


Baker, Nicholas (Dorset N)
Dicks, Terry


Baldry, Tony
Douglas-Hamilton, Lord James


Batiste, Spencer
Dover, Den


Beaumont-Dark, Anthony
Dunn, Bob


Bellingham, Henry
Durant, Tony


Bendall, Vivian
Dykes, Hugh


Bennett, Nicholas (Pembroke)
Evans, David (Welwyn Hatf'd)


Benyon, W.
Evennett, David


Bevan, David Gilroy
Fairbairn, Sir Nicholas


Biffen, Rt Hon John
Favell, Tony


Blaker, Rt Hon Sir Peter
Fishburn, John Dudley


Body, Sir Richard
Forman, Nigel


Bonsor, Sir Nicholas
Forsyth, Michael (Stirling)


Boscawen, Hon Robert
Fowler, Rt Hon Sir Norman


Boswell, Tim
Fox, Sir Marcus


Bottomley, Mrs Virginia
Franks, Cecil


Bowden, Gerald (Dulwich)
Freeman, Roger


Bowis, John
French, Douglas


Boyson, Rt Hon Dr Sir Rhodes
Fry, Peter


Braine, Rt Hon Sir Bernard
Gardiner, George


Brandon-Bravo, Martin
Garel-Jones, Tristan


Brazier, Julian
Gill, Christopher


Bright, Graham
Glyn, Dr Sir Alan


Brooke, Rt Hon Peter
Goodhart, Sir Philip


Brown, Michael (Brigg &amp; Cl't's)
Goodlad, Alastair


Bruce, Ian (Dorset South)
Goodson-Wickes, Dr Charles


Burns, Simon
Gorman, Mrs Teresa


Burt, Alistair
Gow, Ian


Butcher, John
Grant, Sir Anthony (CambsSW)


Butler, Chris
Greenway, Harry (Ealing N)


Carlisle, John, (Luton N)
Greenway, John (Ryedale)


Carlisle, Kenneth (Lincoln)
Griffiths, Peter (Portsmouth N)


Carrington, Matthew
Grylls, Michael


Carttiss, Michael
Hague, William


Chalker, Rt Hon Mrs Lynda
Hamilton, Neil (Tatton)


Channon, Rt Hon Paul
Hanley, Jeremy


Chapman, Sydney
Hannam, John


Chope, Christopher
Hargreaves, Ken (Hyndburn)


Churchill, Mr
Harris, David






Haselhurst, Alan
Neubert, Michael


Hawkins, Christopher
Newton, Rt Hon Tony


Hayhoe, Rt Hon Sir Barney
Nicholls, Patrick


Heathcoat-Amory, David
Nicholson, David (Taunton)


Heseltine, Rt Hon Michael
Nicholson, Emma (Devon West)


Hicks, Mrs Maureen (Wolv' NE)
Norris, Steve


Hicks, Robert (Cornwall SE)
Onslow, Rt Hon Cranley


Hill, James
Oppenheim, Phillip


Hogg, Hon Douglas (Gr'th'm)
Page, Richard


Howarth, G. (Cannock &amp; B'wd)
Paice, James


Howe, Rt Hon Sir Geoffrey
Parkinson, Rt Hon Cecil


Howell, Ralph (North Norfolk)
Patnick, Irvine


Hughes, Robert G. (Harrow W)
Patten, Rt Hon Chris (Bath)


Hunt, Sir John (Ravensbourne)
Patten, Rt Hon John


Hunter, Andrew
Pawsey, James


Irvine, Michael
Peacock, Mrs Elizabeth


Irving, Sir Charles
Porter, David (Waveney)


Jack, Michael
Raffan, Keith


Jackson, Robert
Raison, Rt Hon Timothy


Janman, Tim
Redwood, John


Jessel, Toby
Renton, Rt Hon Tim


Johnson Smith, Sir Geoffrey
Rhodes James, Robert


Jones, Robert B (Herts W)
Riddick, Graham


Kellett-Bowman, Dame Elaine
Ridley, Rt Hon Nicholas


Key, Robert
Ridsdale, Sir Julian


Kilfedder, James
Rifkind, Rt Hon Malcolm


King, Roger (B'ham N'thfield)
Roberts, Wyn (Conwy)


Kirkhope, Timothy
Rost, Peter


Knapman, Roger
Rowe, Andrew


Knight, Greg (Derby North)
Ryder, Richard


Knight, Dame Jill (Edgbaston)
Sainsbury, Hon Tim


Knowles, Michael
Scott, Rt Hon Nicholas


Knox, David
Shaw, David (Dover)


Lamont, Rt Hon Norman
Shaw, Sir Giles (Pudsey)


Lang, Ian
Shelton, Sir William


Latham, Michael
Shephard, Mrs G. (Norfolk SW)


Lee, John (Pendle)
Skeet, Sir Trevor


Leigh, Edward (Gainsbor'gh)
Smith, Tim (Beaconsfield)


Lennox-Boyd, Hon Mark
Speller, Tony


Lightbown, David
Spicer, Sir Jim (Dorset W)


Lilley, Peter
Spicer, Michael (S Worcs)


Lloyd, Sir Ian (Havant)
Stanbrook, Ivor


Lloyd, Peter (Fareham)
Stanley, Rt Hon Sir John


Lord, Michael
Steen, Anthony


Luce, Rt Hon Richard
Stern, Michael


Lyell, Rt Hon Sir Nicholas
Stevens, Lewis


McCrindle, Robert
Stewart, Allan (Eastwood)


Macfarlane, Sir Neil
Stewart, Andy (Sherwood)


MacGregor, Rt Hon John
Stewart, Rt Hon Ian (Herts N)


MacKay, Andrew (E Berkshire)
Stradling Thomas, Sir John


Maclean, David
Sumberg, David


McLoughlin, Patrick
Taylor, Ian (Esher)


Madel, David
Taylor, John M (Solihull)


Major, Rt Hon John
Taylor, Teddy (S'end E)


Malins, Humfrey
Temple-Morris, Peter


Mans, Keith
Thompson, D. (Calder Valley)


Maples, John
Thompson, Patrick (Norwich N)


Marshall, Michael (Arundel)
Thorne, Neil


Martin, David (Portsmouth S)
Thornton, Malcolm


Mates, Michael
Thurnham, Peter


Maude, Hon Francis
Townend, John (Bridlington)


Mawhinney, Dr Brian
Townsend, Cyril D. (B'heath)


Mayhew, Rt Hon Sir Patrick
Twinn, Dr Ian


Mellor, David
Waddington, Rt Hon David


Meyer, Sir Anthony
Waldegrave, Rt Hon William


Miller, Sir Hal
Walden, George


Mills, Iain
Walker, Bill (T'side North)


Miscampbell, Norman
Waller, Gary


Mitchell, Andrew (Gedling)
Wardle, Charles (Bexhill)


Moate, Roger
Watts, John


Monro, Sir Hector
Whitney, Ray


Montgomery, Sir Fergus
Widdecombe, Ann


Morris, M (N'hampton S)
Wiggin, Jerry


Morrison, Sir Charles
Wilshire, David


Moss, Malcolm
Winterton, Mrs Ann


Moynihan, Hon Colin
Wolfson, Mark


Mudd, David
Wood, Timothy





Woodcock, Dr. Mike
Tellers for the Noes:


Yeo, Tim
Mr. Tom Sackville and


Younger, Rt Hon George
Mr. Michael Fallon.

Question accordingly negatived.

Amendment proposed: No. 18, in page 12, line 37, at end insert—
'(3) This section shall operate to relieve the taxable benefit from basic rate tax only. The benefit is still to be charged at the excess of higher rate over basic rate tax.'.—[Mr. Beith.]

Question put, That the amendment be made:—

The Committee divided: Ayes 89, Noes 236.

Division No. 212]
[7.31 pm


AYES


Allen, Graham
Jones, Martyn (Clwyd S W)


Alton, David
Kennedy, Charles


Archer, Rt Hon Peter
Kinnock, Rt Hon Neil


Banks, Tony (Newham NW)
Kirkwood, Archy


Barnes, Harry (Derbyshire NE)
Leighton, Ron


Barnes, Mrs Rosie (Greenwich)
Lewis, Terry


Battle, John
Livsey, Richard


Beckett, Margaret
Lloyd, Tony (Stretford)


Beith, A. J.
Loyden, Eddie


Bermingham, Gerald
McFall, John


Boateng, Paul
Maclennan, Robert


Boyes, Roland
Madden, Max


Bradley, Keith
Martlew, Eric


Brown, Ron (Edinburgh Leith)
Maxton, John


Bruce, Malcolm (Gordon)
Meale, Alan


Callaghan, Jim
Molyneaux, Rt Hon James


Campbell, Menzies (Fife NE)
Moonie, Dr Lewis


Campbell-Savours, D. N.
Mullin, Chris


Carlile, Alex (Mont'g)
Murphy, Paul


Cartwright, John
Parry, Robert


Clarke, Tom (Monklands W)
Patchett, Terry


Clay, Bob
Pike, Peter L.


Clelland, David
Powell, Ray (Ogmore)


Clwyd, Mrs Ann
Radice, Giles


Cook, Frank (Stockton N)
Robertson, George


Cryer, Bob
Ruddock, Joan


Cunliffe, Lawrence
Skinner, Dennis


Dalyell, Tam
Smith, Andrew (Oxford E)


Dixon, Don
Smith, C. (Isl'ton &amp; F'bury)


Eadie, Alexander
Smith, J. P. (Vale of Glam)


Eastham, Ken
Spearing, Nigel


Evans, John (St Helens N)
Steel, Rt Hon Sir David


Ewing, Harry (Falkirk E)
Strang, Gavin


Fearn, Ronald
Taylor, Mrs Ann (Dewsbury)


Fisher, Mark
Turner, Dennis


Foster, Derek
Warden, Gareth (Gower)


Foulkes, George
Wareing, Robert N.


Garrett, Ted (Wallsend)
Welsh, Andrew (Angus E)


Golding, Mrs Llin
Wigley, Dafydd


Grocott, Bruce
Williams, Alan W. (Carm'then)


Haynes, Frank
Winnick, David


Home Robertson, John
Young, David (Bolton SE)


Hood, Jimmy



Howells, Dr. Kim (Pontypridd)
Tellers for the Ayes:


Hughes, John (Coventry NE)
Mr. James Wallace and


Johnston, Sir Russell
Mr. Matthew Taylor.


Jones, Barry (Alyn &amp; Deeside)





NOES


Adley, Robert
Batiste, Spencer


Aitken, Jonathan
Beaumont-Dark, Anthony


Alison, Rt Hon Michael
Bellingham, Henry


Amery, Rt Hon Julian
Bendall, Vivian


Amess, David
Bennett, Nicholas (Pembroke)


Amos, Alan
Benyon, W.


Arbuthnot, James
Bevan, David Gilroy


Arnold, Jacques (Gravesham)
Biffen, Rt Hon John


Arnold, Tom (Hazel Grove)
Blaker, Rt Hon Sir Peter


Atkins, Robert
Body, Sir Richard


Atkinson, David
Boscawen, Hon Robert


Baker, Rt Hon K. (Mole Valley)
Boswell, Tim


Baker, Nicholas (Dorset N)
Bottomley, Peter


Baldry, Tony
Bottomley, Mrs Virginia






Bowis, John
Hunter, Andrew


Braine, Rt Hon Sir Bernard
Irvine, Michael


Brandon-Bravo, Martin
Irving, Sir Charles


Brazier, Julian
Jack, Michael


Bright, Graham
Jackson, Robert


Brown, Michael (Brigg &amp; Cl't's)
Janman, Tim


Bruce, Ian (Dorset South)
Jessel, Toby


Burns, Simon
Johnson Smith, Sir Geoffrey


Burt, Alistair
Kellett-Bowman, Dame Elaine


Butcher, John
Kilfedder, James


Butler, Chris
King, Roger (B'ham N'thfield)


Carlisle, John, (Luton N)
Kirkhope, Timothy


Carlisle, Kenneth (Lincoln)
Knapman, Roger


Carrington, Matthew
Knowles, Michael


Carttiss, Michael
Knox, David


Chalker, Rt Hon Mrs Lynda
Lamont, Rt Hon Norman


Channon, Rt Hon Paul
Lee, John (Pendle)


Chope, Christopher
Leigh, Edward (Gainsbor'gh)


Churchill, Mr
Lennox-Boyd, Hon Mark


Clark, Hon Alan (Plym'th S'n)
Lilley, Peter


Clark, Dr Michael (Rochford)
Lloyd, Peter (Fareham)


Clark, Sir W. (Croydon S)
Lord, Michael


Clarke, Rt Hon K. (Rushcliffe)
Luce, Rt Hon Richard


Conway, Derek
Lyell, Rt Hon Sir Nicholas


Coombs, Anthony (Wyre F'rest)
McCrindle, Robert


Coombs, Simon (Swindon)
Macfarlane, Sir Neil


Couchman, James
MacGregor, Rt Hon John


Davies, Q. (Stamf'd &amp; Spald'g)
MacKay, Andrew (E Berkshire)


Davis, David (Boothferry)
Maclean, David


Day, Stephen
McLoughlin, Patrick


Dicks, Terry
Madel, David


Douglas-Hamilton, Lord James
Major, Rt Hon John


Dover, Den
Mans, Keith


Dunn, Bob
Maples, John


Durant, Tony
Marshall, Michael (Arundel)


Dykes, Hugh
Martin, David (Portsmouth S)


Evans, David (Welwyn Hatf'd)
Mates, Michael


Evennett, David
Maude, Hon Francis


Fairbairn, Sir Nicholas
Mawhinney, Dr Brian


Fallon, Michael
Mayhew, Rt Hon Sir Patrick


Favell, Tony
Mellor, David


Fishburn, John Dudley
Meyer, Sir Anthony


Forman, Nigel
Miller, Sir Hal


Forsyth, Michael (Stirling)
Mills, Iain


Fox, Sir Marcus
Miscampbell, Norman


Franks, Cecil
Mitchell, Andrew (Gedling)


Freeman, Roger
Moate, Roger


French, Douglas
Monro, Sir Hector


Fry, Peter
Montgomery, Sir Fergus


Gardiner, George
Morris, M (N'hampton S)


Garel-Jones, Tristan
Morrison, Sir Charles


Gill, Christopher
Moss, Malcolm


Glyn, Dr Sir Alan
Moynihan, Hon Colin


Goodhart, Sir Philip
Mudd, David


Goodlad, Alastair
Neubert, Michael


Goodson-Wickes, Dr Charles
Newton, Rt Hon Tony


Gorman, Mrs Teresa
Nicholson, David (Taunton)


Gow, Ian
Nicholson, Emma (Devon West)


Grant, Sir Anthony (CambsSW)
Norris, Steve


Greenway, Harry (Ealing N)
Onslow, Rt Hon Cranley


Greenway, John (Ryedale)
Oppenheim, Phillip


Griffiths, Peter (Portsmouth N)
Page, Richard


Grylls, Michael
Paice, James


Hague, William
Parkinson, Rt Hon Cecil


Hamilton, Neil (Tatton)
Patnick, Irvine


Hanley, Jeremy
Patten, Rt Hon Chris (Bath)


Hannam, John
Patten, Rt Hon John


Hargreaves, Ken (Hyndburn)
Pawsey, James


Harris, David
Peacock, Mrs Elizabeth


Haselhurst, Alan
Porter, David (Waveney)


Hayhoe, Rt Hon Sir Barney
Raffan, Keith


Heathcoat-Amory, David
Raison, Rt Hon Timothy


Heseltine, Rt Hon Michael
Redwood, John


Hicks, Mrs Maureen (Wolv' NE)
Renton, Rt Hon Tim


Hicks, Robert (Cornwall SE)
Rhodes James, Robert


Hill, James
Riddick, Graham


Hogg, Hon Douglas (Gr'th'm)
Ridley, Rt Hon Nicholas


Howarth, G. (Cannock &amp; B'wd)
Rifkind, Rt Hon Malcolm


Howe, Rt Hon Sir Geoffrey
Roberts, Wyn (Conwy)


Hughes, Robert G. (Harrow W)
Rost, Peter





Rowe, Andrew
Thornton, Malcolm


Ryder, Richard
Thurnham, Peter


Sackville, Hon Tom
Townend, John (Bridlington)


Sainsbury, Hon Tim
Twinn, Dr Ian


Scott, Rt Hon Nicholas
Waddington, Rt Hon David


Shaw, David (Dover)
Waldegrave, Rt Hon William


Shaw, Sir Giles (Pudsey)
Walden, George


Shelton, Sir William
Walker, Bill (T'side North)


Shephard, Mrs G. (Norfolk SW)
Waller, Gary


Smith, Tim (Beaconsfield)
Wardle, Charles (Bexhill)


Speller, Tony
Watts, John


Spicer, Sir Jim (Dorset W)
Wells, Bowen


Spicer, Michael (S Worcs)
Whitney, Ray


Stanley, Rt Hon Sir John
Widdecombe, Ann


Steen, Anthony
Wilkinson, John


Stern, Michael
Wilshire, David


Stewart, Allan (Eastwood)
Winterton, Mrs Ann


Stewart, Andy (Sherwood)
Wolfson, Mark


Stewart, Rt Hon Ian (Herts N)
Wood, Timothy


Stradling Thomas, Sir John
Woodcock, Dr. Mike


Taylor, Ian (Esher)
Yeo, Tim


Taylor, John M (Solihull)
Younger, Rt Hon George


Taylor, Teddy (S'end E)



Temple-Morris, Peter
Tellers for the Noes:


Thompson, Patrick (Norwich N)
Mr. David Lightbown and Mr. Sydney Chapman.


Thorne, Neil

Question accordingly negatived.

Clause 20 ordered to stand part of the Bill.

Mr. Boateng: On a point of order, Mr. Walker. Hon. Members will be aware that late this afternoon there occurred in Wembley, in my constituency, a cowardly and murderous attack on an army installation in a quiet suburban street. One person was killed and at least eight were seriously injured. Wembley town centre was shaken by the blast.
As this is the second such attack in London in a very short period, there would clearly seem to be a pattern to these events and it appears to be the start of a major terrorist campaign. In view of that, would it not be in order for a member of Her Majesty's Government to come to the House and make a statement about the steps that are to be taken to counter that campaign?
Clearly, difficulties are always involved in such incidents. Those responsible for these murderous attacks are likely to strike at random. They have no care for the civilian population and do not mind the hardship, suffering and agony that they cause to communities. They are beneath contempt. But some action has to be taken to alert the civilian population and such installations to the danger that exists. We must step up our vigilance and our support for the police and emergency services, which must have the resources at their disposal to deal with this menace, and have them now. I hope that a Minister will come to the Despatch Box and make just such a statement because one is urgently needed.

The Minister of State for Defence Procurement (Mr. Alan Clark): Further to that point of order, Mr. Walker. I express my appreciation of the exceedingly wise and temperate manner in which the hon. Member for Brent, South (Mr. Boateng) made his points. As for a statement by one of my hon. Friends or myself, that matter is under urgent and immediate consideration.

Clause 23

TAX-EXEMPT SPECIAL SAVINGS ACCOUNTS

Mr. John McFall: I beg to move amendment No. 31, in page 14, line 26, after 'society', insert
'or an industrial and provident society'.

The Chairman: With this it will be convenient to take amendment No. 32, in page 14, line 26, after 'society', insert
'or an industrial and provident society covered by a loan deposit protection scheme approved by Her Majesty's Treasury'.

Mr. McFall: I am speaking on behalf of the co-operative movement, which has been largely ignored by the Government in the Bill. We welcome the inclusion of building societies in the TESSA—tax-exempt special savings account—scheme because they are part of the mutual sector. Co-operative societies have a long tradition of being savings institutions in addition to their role as retailers. We should welcome the inclusion of cooperatives within the scheme.
Since 1844, co-ops have encouraged their members to follow a policy of self-help and thrift, in line with the present Government's view on wider share ownership. The co-operative movement was built on the policy of savings. The surpluses arising on trading were allocated to members pro rata to their trading with the co-operatives. Those amounts were credited to the members' share accounts and formed the working capital of the co-ops, on which a limited rate of interest was payable.
The membership of co-ops in the United Kingdom today is about 8 million and the retail turnover is slightly less than £6 billion. That shows that it is still a fine example of self-help and a force in the retail market.
Up to 1984 it was accepted that co-ops were different from other organisations because they were liable to corporation tax at a special 40 per cent. rate, when other companies paid 52 per cent. on taxable profits. It was then decided to make changes in the structure of taxation: relief was withdrawn for the increases in trading stock, and first-year allowances and the special rates for co-ops were withdrawn. To compensate for those withdrawals, the rate of corporation tax was reduced to 35 per cent. The co-operative movement and I felt that that change benefited companies more than co-operatives.
Along with those changes, tax incentives were introduced to assist various categories of taxpayer, for example the business expansion scheme, profit sharing and personal equity plans. In all those cases, co-ops could not take advantage of any of the tax incentives. All those factors have disadvantaged co-ops in relation to their competitors. Therefore, if the proposed TESSA savings scheme is introduced, and co-ops are once again excluded, there is a considerable danger that that will result in money being withdrawn from co-operatives and invested in TESSAs with banks and building societies. That would undoubtedly place co-ops in considerable difficulties.
Therefore, we request that co-ops should have the same opportunities to participate in the operation of the new TESSAs as banks and building societies. We emphasise

that we are asking not for special treatment but merely for parity of treatment with those concerns, which we see as competitors in obtaining capital.
Amendments Nos. 31 and 32 are intended as alternatives. The first would bring all industrial and provident societies, including co-operatives and friendly societies, into the net. If the Government feel that that is too wide, the second amendment would bring in societies whose depositors are already protected under a scheme drawn up under the Banking Act 1987. Those schemes give our savers protection comparable with that enjoyed by depositors with banks and building societies.
We believe that either amendment would assist the Chancellor's objective of encouraging savings, because they would widen the social range of people taking advantage of the new concessions on TESSAs. I commend the amendments to the House.

Mr. Lilley: One of the key features of TESSA is that we have taken great care to keep the rules and regulations and general red tape to an absolute minimum. We can do that for a scheme that is confined to banks and building societies because for each of those types of institution there is already a proper statutory framework in the Banking Act 1987 or Building Societies Act 1986 providing for authorisation, regulation and investor protection, so we did not need to add that to clause 23.
Once we tried, however, to go wider than the two main groups of deposit takers, it would be necessary to complicate the Finance Bill provisions to take account of the different circumstances of the bodies concerned. I should be very reluctant to do that, and in the absence of a proper regulatory framework, the Inland Revenue would need to get more involved in checking that institutions were operating the new TESSA scheme properly.
The two amendments would appear to bring in all industrial and provident societies, many of which do not typically take deposits at all. It is true that it would be theoretically possible to limit the scope of the clause to co-ops, which I imagine is the intention of the hon. Member for Dumbarton (Mr. McFall).
It is true that co-ops have historically undertaken small-scale deposit taking. The hon. Members who sponsored the amendments were obviously well aware of that, and I recognise that the co-ops' depositors are covered by an investor protection scheme, as the hon. Gentleman mentioned. But the point is that co-ops benefit from total exemption from the Banking Act and are not subject to the detailed authorisation or prudential supervision applied to banks and building societies. I do not therefore think it appropriate that they should be allowed to offer TESSAs.
Moreover, co-ops' exemptions under the Banking Act exist largely because their deposit taking is on a small scale and incidental to their main trading activity. If societies wanted to expand their deposit-taking activities significantly or to enter the mainstream of retail banking with products such as TESSAs, those exemptions would no longer be appropriate.
Co-ops also have a certain tax advantage; they can pay interest gross on their deposits to taxpayers and non-taxpayers alike. So they do not get a bad deal overall under the present arrangements.
The co-operative movement is not excluded from TESSA altogether, since I understand that the Co-op bank is authorised under the Banking Act. I must advise the


House not to accept the amendments, which go further than is necessary or desirable and which complicate unduly what is now a very simple scheme.

Mr. McFall: The Minister correctly said that the Co-op bank is included, but there are many other aspects to the co-operative movement and it was to highlight them that I moved the amendment. I have no intention of pressing it to a Division but I should like the Minister to consider incorporating co-ops in future. As I said earlier, we have a membership of 8 million and a turnover of £6 billion, a not inconsiderable element in the economy. Perhaps if the Minister cannot give me an answer today, he will do so at some time in the future.

Mr. Lilley: I shall certainly do that, and I welcome the co-operative spirit in which the hon. Gentleman moved the amendment. We recognise the valuable contribution that the co-operative movement makes, both to its members and to the economy, and I shall look into the matter in that spirit.

Mr. Harry Ewing: I have not previously attended the debates on the Finance Bill, but the Minister's agreement to consider what my hon. Friend the Member for Dumbarton (Mr. McFall) has proposed was helpful. I look forward to the outcome of his consideration.
To help the Minister's consideration, may I say a word or two as the former chairman of a co-operative society, the former chairman of the Scottish co-operative wages board and salaries committee and as a member of the national wages board? In my younger days I was deeply involved in the co-operative movement, so I am well aware of the integral part that that movement has played in various localities, especially in the industrial areas of Great Britain.
It is certainly true, as my hon. Friend would concede, that much of the co-operative movement has disappeared from industrial Britain for the very reasons that my hon. Friend adduced—the co-operative movement, through no fault of Governments, has gradually been placed at a disadvantage vis-a-vis its competitors. If the movement were placed at an even greater disadvantage, that could be serious.
The problem is that the capital that shareholders invest in the movement is not in shares in the sense in which they are quoted on the stock exchange; nor are they shares in the sense that they must be sold to someone else before a person can redeem his investment. This is a banking system from which people can withdraw share capital at seven days' notice. When more attractive avenues for savings open up, there can be a run on share capital, and co-operative societies throughout the country face severe difficulties when such runs occur because they can have a grave impact on a society's trading position.
I am glad that my hon. Friend the Member for Dumbarton has taken this opportunity to speak about his amendments, and he is right not to push them to the vote. He has given the House a chance to hear about the continuing importance of the co-operative movement in many places throughout the country. Indeed, I notice that co-operative organisations are springing up again in deprived areas where groups are getting together to form them. In many ways that takes us back to the days of the

Rochdale pioneers and even to the founder of the co-operative movement himself—Owen. History has come full circle, so I am glad that the Minister is keeping an open mind. I hope that he will consider the amendments as seriously as he spoke about them.

Amendment negatived.

Question proposed, That the clause stand part of the Bill.

Mr. John Battle: This was a Budget of small measures, and TESSAs are another small measure. One of the Government's claimed highlights in an otherwise lacklustre Bill is the introduction of the tax-exempt special savings accounts, now running under the acronym TESSAs. They constitute the Government's attempt to make savings more attractive.
This seems to me a backhanded attempt to acknowledge that a great economic error was made in the 1988 Budget—the tax cuts of the right hon. Member for Blaby (Mr. Lawson), which were much heralded at the time but which have since been shown to have fuelled a massive increase in consumer spending and to have generated a spending boom. By handing out deep tax cuts, the Government merely fuelled a massive trade deficit.
The tax-cutting Budget of 1988 also resulted in a massive redistribution of wealth from the poorest to the richest. In the 11 years during which the Government have been in office, £6 ·7 billion has been taken from the bottom 50 per cent. of the population and £5 ·6 billion of that has gone to the richest 10 per cent. Of that sum, £4 ·8 billion has gone to the top 5 per cent.
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We encourage savings, but we are entitled to ask whether that will encourage real savings or whether it will be another tax break for those who already have savings. TESSAs were welcomed by the Secretary of State for Wales and there was a tribute to that welcome in The Times on 21 March:
A wry smile flashed across the relaxed face of Peter Walker, out-going Secretary of State for Wales, when John Major disclosed details of the new Tax-Exempt Special Savings Account—which he promptly abbreviated to `Tessa'. For that is the name of Walker's wife. After the speech Walker admitted he had indeed been smiling for that reason. 'I was at the Cabinet meeting this morning when John Major told us the news and I told him that I was very grateful that, for my last Budget, there was something in it dedicated to my wife'".
Perhaps the right hon. Gentleman and his wife are thinking of taking up a TESSA. They are in a good position to do so because TESSAs will not reach down to the small savers but will be geared to people in the middle and higher income brackets.
TESSAs were welcomed with caution by the City. There was not an immediate response, nor the view that they would result in an increase in savings throughout the population. A recent report from the Select Committee on the Treasury and Civil Service said:
We would not necessarily expect to see a very sharp increase in aggregate in savings in the short term as a result of the Budget measures.
A Mr. Olivier, of Hambros unit trusts business, was reported in the Financial Times as saying:
TESSAs are more likely to reshuffle old money about.
If that is the case there may well be no real encouragement for new savings.
The key question is, who will be expected to save in the current economic climate? The Bill gives some tax


concessions to companies and to the City but does nothing to help the poorest to meet higher costs in rents, mortgages and the poll tax. It does nothing for 7 million people on low pay. The Treasury figures show that, although 85 per cent. of couples who earn more than £35,000 a year will benefit, only 25 per cent. of those who earn between £5,000 and £10,000 will gain from the Budget.
The number of people caught in the poverty trap of taxes and means-tested benefits is estimated to increase to 410,000, compared with 290,000 in November 1985. Since the poll tax was introduced at the beginning of last month, a family on half average earnings will be about £1·80 a week worse off as a result of the Bill. That also results from the holding back of an increase in child benefit and the introduction of the poll tax. Many families will pay an extra 91p a week in spending taxes.
Let us look at those who would not benefit from taking up a TESSA because they have no liability to tax anyway. They include people on benefit or income support, the unemployed, pensioners without substantial occupational pensions, and single people earning less than £6,500 who are unlikely to have much spare cash to move into TESSAs. Couples earning less than £13,000 are also unlikely to have much spare cash to spend on them.
In the case of married couples where the wife does not work and there is not much in the way of savings, the interest income is already covered by the wife's tax allowance, so TESSAs will not benefit such couples. The same applies to couples where the wife is earning less than £3,000 and there are no large savings. Anyone with a mortgage of more than £30,000 is unlikely to take up a TESSA because it would be better for him to pay off his mortgage.
The categories of people that I have mentioned make up the bulk of my constituents, and I am sure that they fit the constituents of many other hon. Members. The average wage is £269·50 a week, but on the whole people in my constituency do not earn as much as that. Although west Yorkshire is a low-wage area, it is at the top of the savings league; the people there save 14 ·8 per cent. of their income. They are good savers, although they have very low incomes, hut TESSAs will not help them. The real beneficiaries will be married couples who already have investment income of £3,300 or more on current interest rates and who have at least £25,000 in the bank or about £60,000 in shares. Couples where the wife earns over £3,300 but who do not have a mortgage of more than £30,000 will also benefit, as will single people earning more than £6,500.
There are two essential requirements for a TESSA to be of any advantage to a family. The first is that that family has the resources to be able to put money into a TESSA. The second is that there would otherwise have been a tax liability on the interest receivable. If the first requirement is not satisfied, in practice it is not possible to use a TESSA at all or no tax advantage can be obtained. If the second requirement is not satisfied, a TESSA can be operated, but it obviously offers the family no tax advantage.
Before we can make a judgment about whether there are adequate resources to put money into TESSAs, we must bear in mind the requirement that the money cannot be withdrawn before the end of the five-year period. That means that only people who are able to save as a matter of course each year out of income are likely to be able to take up TESSAs.

As I have said, non-taxpayers, those on benefit and pensioners who do not have a substantial occupational pensions will not be able to benefit, nor will those whose incomes are largely taken up trying to survive by day-to-day expenditure. That category could be said to include single people earning less than £6,500, virtually all single-parent families and married couples earning less than £13,000 a year. They are all unlikely to have any disposable income for TESSAs, especially after mortgage rises are taken into account. We challenge the Government's notion that TESSAs are a great gift and an incentive to savers. It will be seen that the advantages of TESSAs are for high-income families and that that advantage will be magnified because both husband and wife can take up a TESSA.
Despite the Government's warnings about the inflationary wage spiral, top company directors continue to award themselves rises far in excess of inflation. Recent increases in directors' salaries have been as high as 171 per cent., and average rises are 40 per cent. I am not talking just about boardroom directors. A recent feature in the Financial Times showed that Britain's business managers —those earning between £30,000 and £200,000 a year—are on schedule for pay increases of between 12 and 14 per cent. Perhaps it is to precisely such people that TESSAs are directed. It would have been better not to directly redistribute income to them in the first place in the tax-cutting Budget of 1988.
It remains to be seen whether TESSAs will result in a new build-up of savings rather than switches from other accounts or perhaps from shares. Will they attract people who would have saved in the medium term anyway? It could be argued that, at a time of a high interest rates, no one with a mortgage is likely to save money on a regular and long-term basis when it could be used to repay that mortgage. Have the Government considered that argument?
One could push the logic of the argument and say that TESSAs will encourage borrowing. If the Government have not considered it they might like to take account of the way that TESSAs will impact on working out repayments of mortgage interest. In practice, they may have the opposite effect to encouraging savings.
This is a small measure, and we believe that TESSAs will have a marginal effect—at best, increasing the personal sector savings ratio. We question the usefulness of a scheme which, in the current economic climate, merely rewards existing savers for their existing savings. There is no evidence that TESSAs will encourage those on low incomes to save. A much better alternative to TESSAs would be positive public support for bodies such as credit unions, which provide community-based means of encouraging even those on the lowest incomes to save and share. Even such bodies found favour and encouragement in The Economist on 31 March. I shall be pressing my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) to do all that he can for credit unions when he is appointed Chancellor of the Exchequer, as he will be soon.

Mr. Lilley: The hon. Member for Leeds, West (Mr. Battle) described TESSA as a tiny measure. I think that it is an important measure both for what it achieves and for the signals that it generates in the economy as a whole. It is one of the most imaginative features of the Budget. He suggested that the name "tax-exempt special savings


account" was a deliberate attempt to ingratiate ourselves with my right hon. Friend the Member for Worcester (Mr. Walker). There may be some truth in that, but, if so, it was because I could not find a name for the scheme that would result in the acronym NORMA and that meant the same thing.
This is a straightforward and simple instrument. It took a lot of paring down to make it as simple as it is. We have deliberately kept the rules and restrictions to a bare minimum. That is desirable in any case, but it is especially important if the scheme is to attract ordinary taxpayers. We do not want a scheme which appeals only to sophisticated financial whiz kids. TESSA is for all taxpayers. I am pleased to note that it has been welcomed from both sides of the House and outside.
Contrary to what the hon. Member for Leeds, West said, TESSA is aimed at the ordinary person and, because of that, we based the scheme on the most simple and straightforward form of saving—putting money into a high street bank or building society. We are not saying that this form of saving is better than any other. My right hon. Friend the Chancellor took the opportunity in the Budget to encourage other forms of saving, including significant increases in the amount that could be saved in personal equity plans. I hope that many of those who are encouraged to begin saving in a TESSA will go on to discover the attractions of share ownership. If we are to influence people's decisions at the margins between saving and spending, rather than just affecting the choice between different ways of saving, it is absolutely right to target the most simple and familiar form of saving.
TESSAs can be started from 1 January 1991. Already there are signs that the major banks and building societies will offer TESSAs. We are delighted that they are putting their marketing efforts behind this form of savings. In some cases, institutions may offer several variants, aimed at the people in different circumstances. I welcome this because we want TESSA to reach as many people as possible. It is clear that she will be a great success.
The hon. Member for Leeds, West said that TESSAs will not benefit those in low income groups because so many of them are not paying tax. We have raised tax relief by 35 per cent. in real terms, and inevitably, if a larger chunk of income is relieved from tax, more people are paying less tax. They should not benefit twice from the absence of tax—through not paying on low incomes, and with a relief such as TESSA. That is inevitable, but it is more desirable that allowances are set at this level rather than at the level that we inherited.
The hon. Member for Leeds, West claimed that TESSA is aimed at, and will benefit, the rich. There is a £9,000 limit on the amount that can be paid into a TESSA over five years. During the Budget debate, the Leader of the Opposition said of the £16,000 limit on savings above which people could not benefit from community charge relief, that it was not "a prince's ransom". Therefore, £9,000 is even less of a prince's ransom. It is a respectable, modest amount and many people will be able to aspire to contribute that over five years.
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The hon. Member for Leeds, West quoted a City document which said that TESSA would simply result in the reshuffling of old money. All money is either in bank

notes—in the minority of cases—or in bank and building society deposits. TESSA will encourage people to shift from highly liquid deposits to deposits for which there is a growing incentive not to spend. There is a distinction between having money in a deposit that is spent frequently and therefore circulates freely about the economy and having money in a deposit that is saved. The latter is the one that we are trying to encourage. Once people have put their money into a TESSA, they will have put it into something like a mousetrap. They will lose nothing by doing so, but should they then spend the money they will have to forgo the tax relief that has built up in the TESSA. There may be a reluctance to withdraw money from a TESSA, but there is not to withdraw from ordinary deposit accounts. That is an incentive to save and is thoroughly desirable.

Ms. Diane Abbott: I apologise for not being here for the beginning of the Minister's speech.
There is an argument over whether TESSA will involve only the reshuffling of money, or, as Conservative Members imply, result in an increase in the overall volume of saving. The Select Committee on the Treasury and Civil Service has addressed this question, and we questioned Treasury officials when we took evidence on the Budget. They said clearly that any claims that TESSA would increase the overall volume of savings were invalid. It will involve switching money not from ordinary deposit accounts or current accounts but from other forms of saving. The Committee could find no one to say that TESSA would either mean people switching money from a liquid state to a savings account or do anything to increase the overall level of saving.
The claims by the Chancellor of the Exchequer that this is a Budget for saving were bogus and invalid. This is not just the common coin of political half-truths but a serious matter because under the Government the savings ratio has dropped sharply and one of our problems is lack of saving.

Mr. Lilley: I will examine the evidence to which the hon. Lady refers, but I doubt whether her interpretation of it will be the same as mine. I am sure that my officials did not say that most contributions to TESSAs would come from some other source than deposits already in the banks and building societies. We do not know where it will come from, but undoubtedly a great deal of it will come from money already in the banking system. It will be rendered less liquid by being put into TESSAs.
The hon. Member for Leeds, West said that this was a measure to redeem the tax cuts made in the 1988 Budget. That is not the case. We are trying, by the period of high interest rates through which it is necessary to go, to ensure that borrowing is discouraged and saving is encouraged, and to bring about a balance between the two. We welcome the fact that we now have much higher investment in the economy. Every pound of investment requires a pound of savings to finance it. We want a higher level of savings, so we want to encourage a climate in which savings are looked upon favourably. TESSA will contribute to the creation of a new climate, over and above the amount of money drawn into it, which could none the less be considerable. This is an important measure. It has


been widely welcomed in the City, by savers and by hon. Members on both sides of the Committee. I commend the clause to the Committee.

Mr. Battle: The Financial Secretary to the Treasury seems to have narrowed the definition of "ordinary person-. He has not acknowledged that many people will be excluded from the scheme. For example, not everyone has a bank account. Surely we should encourage people throughout the income range to take up savings.
It seems that the measure will not reach the many. It appears to be a residue of the trickle-down theory. It will not reach those on low pay. It will not involve the least well-off. I accept that the limit is £9,000, and that is why it is a small measure. It will be crucially undermined by the impact of interest rates on mortgages. Until 1980, the measure could have been useful for a low to middle-income family, but with the introduction of independent taxation for women, the majority of people in that band will not enjoy any tax advantages from TESSAs. It seems that TESSAs are most handy for middle and high-income, mortgage-free families and for single people. If they were not going out of fashion, it would seem to be a classic yuppie handout. That would seem to be so unless the impact of TESSAs can be widened to embrace the entire population.

Mr. Ian Taylor: The hon. Gentleman is forgetting that there are many on modest incomes and with modest cash flows who strive to amass some capital. That is why many of my right hon. and hon. Friends were keen that the capital cut-off point for social benefits should be increased from £8,000 to £16,000. We welcomed that increase. We are talking of material sums for people on modest incomes. We want to give incentives to them, through the tax system, to save more. I think that TESSAs will have quite a considerable impact on those who are paying tax and earning an income, and at the lowest levels.

Mr. Battle: I must disagree with the hon. Gentleman. We may find ourselves in dispute over the term "modest income". I have tried clearly to identify income bands in which people will not be able to take up TESSAs. As I have said, they will not be available to most of my constituents. I represent part of west Yorkshire, an area which has the lowest pay rates in the country. I must add that it has the highest saving rates.

Mr Beith: And the Halifax building society.

Mr. Battle: There is a savings tradition, and my right hon. and hon. Friends and I are not opposed in principle to saving. We are questioning whether TESSAs represent a wide-ranging measure. They might prove to be the result of a rather narrow measure. As a throw-away line, I suggest that they might prove to be Now Only the Rich Man's Answer. That would produce the sort of acronym for which the Minister was looking.

Mr. Lilley: I shall not respond to the final part of the response of the hon. Member for Leeds, West (Mr. Battle). I merely say that I wish that I had thought of it myself.
The hon. Gentleman argued that his constituents, or many of them, will not benefit from TESSAs. There are 34 million people with deposits in banks and building societies. Of that total, 14 million are not taxpayers and therefore will benefit from the abolition of composite rate tax. I am sure that he will welcome that. The other 20

million are taxpayers, and they will be able to benefit from establishing TESSAs if they so wish. I know that we have made considerable progress, but I do not think that we are yet a nation of 20 million yuppies.

Mr. John Home Robertson: I am disappointed that the Financial Secretary to the Treasury has not responded to the remarks of my hon. Friend the Member for Leeds, West (Mr. Battle) about credit unions, with which I much agreed. Credit unions are a genuinely practical way in which people in deprived areas can help themselves. In a particularly deprived part of my constituency, people are trying to work together to establish a credit union. I appreciate that that is not strictly relevant to a debate about TESSAs, but the people that my hon. Friend and I are talking about would find it difficult, if not impossible, to take advantage of TESSAs. A credit union, however, is a way in which such people can help themselves and in turn help their own communities. I do not know whether the Minister has had an opportunity to consider the concept of credit unions on other occasions. I sincerely hope that the Government will look favourably on that sort of local initiative.

Question put and agreed to.

Clause 23 ordered to stand part of the Bill.

Clause 25

AUTHORISATION AND OTHER STATUTORY CONTROLS

Mr. Beith: I beg to move amendment No. 44, in page 16, line 45, leave out
'at the time the trust was established'
and insert 'immediately after the disposal'.

The Temporary Chairman (Mr. Michael Shersby): With this is will be convenient to discuss the following amendments: No. 45, in page 17, line 9, leave out 'subsection (4).'.

No. 46, in page 17, line 37, leave out 'subsection (7).'

Mr. Beith: It is no secret that my party has been committed to employee share ownership schemes since long before I was old enough to be a member of it. It has campaigned on the issue time and again over the years. It made progress during the Lib-Lab pact, during which new legislation was introduced on share ownership. I am pleased to say that that ownership is widening. My party continues the campaign, it is glad that the Government show a significant interest in employee share ownership plans and other forms of wider share ownership, and it will continue to urge them on, year by year, to do more.
The Bill is helpful but my colleagues and I wish to suggest some ways in which employee share ownership schemes can be taken further. We believe that the concept is good in principle. It gives the employee a stake in the firm for which he works, a greater involvement in its affairs and an opportunity to share in its prosperity, not merely through the wages paid for work but through the direct fruit of the dividend on the company's profits. Wider share ownership often has a transforming effect in the workplace as more and more of a company's employees become committed by their share ownership, as well as by their work, to the success of the company. We therefore want to give this form of share ownership as much encouragement as possible.
I hope that that feeling has spread widely, even into areas of the Labour and trade union movement which


were initially hostile to wider share ownership. In the old days, it seemed to them—it may still seem so to some of them—to be an unfortunate breaking down of the traditional distinctions between labour and capital. I am in favour of that, and that is why I am so committed to wider share ownership schemes.
The amendments necessarily take us into a technical area. Under common law, a company can claim a tax deduction for the regular payments that it makes to an employee share ownership trust, provided that it can be shown that the payments are of revenue and not of capital. Whether the payments are revenue in nature is not always clear. Last year's Finance Bill, as it then was, created the qualifying employee share ownership trust. Payments made by a company to a qualifying trust could be guaranteed a tax deduction whether the payments were capital or revenue in nature. The relief provided by the relevant sections was so restrictive, however, that so far as I know the provisions have not been used. The efforts made by the Government in last year's Finance Bill therefore seem not to have borne fruit, unless the Minister has come across an example that I have not yet found.
In practice, trusts continue to prefer the relative uncertainty of the common law provisions to which I have referred. There are two principal reasons for that. First, the structure of a qualifying trust means that it does not fall within the exemptions to the Financial Services Act 1988. The trustees must register and comply with the rules of an appropriate FSA self-regulatory organisation. That costs money and is a rather bureaucratic complication for trustees who are not really interested in providing an investment service. They are there to distribute shares to employees and to obtain funds from the company for that purpose, and having to go through the mechanism of the Financial Services Act 1988 is not something that they anticipated. Secondly, all the employees of a company must participate as beneficiaries of the trust on similar terms. That means that there can be no discrimination between employees. That, too, has proved to be a restriction.
To make the qualifying trusts more popular, clauses 25 to 32 propose to give roll-over relief to gifts of shares made to a qualifying trust. Thus, a person selling shares to such a trust need not suffer capital gains tax on the sale, provided that the proceeds are reinvested in acquiring capital assets. That in itself is good but the existing restrictions and the additional restrictions in the Bill make it unlikely that the provision will make any contribution to the trusts taking off in a big way.
We have suggested a series of amendments designed to relax some of the existing restrictions and to remove the restrictions in the Bill, some of which are contained in parts of the Bill that we shall discuss in Standing Committee. I hope that the Minister will accept our general objective, which is to try to make the provisions usable—indeed, attractive—so as to help to create further trusts. We do not want the creation of trusts to continue to rely mainly on common law provisions which existed before this legislation.
8.30 pm
Amendment No. 44 is intended to allow the trusts to be established in advance. That is especially necessary where a new shelf company is being used as a vehicle for a

management buy-out. Amendment No. 45 would delete a subsection which requires at least 10 per cent. of the ordinary share capital of a company to be in the hands of the trust. In a management buy-out, 60 to 80 per cent. of the equity is provided by institutions, with 20 to 40 per cent. being in the hands of managers and employees. In that context, a 10 per cent. threshold is unrealistically high. I do not understand why it is necessary, and I hope that the Minister will reconsider.
Amendment No. 46 would remove another subsection which denies relief to a vendor if the trustees of the trust make an offside transaction. That is unfair, because the vendor will have no control over the actions of the trustees. There are three areas where there are yet more restrictions which could lead to the continued inappropriateness, in the minds of potential trustees, of the whole Finance Act mechanism in launching employee share ownership plans. I shall discuss that further in Standing Committee.
Our intention is to make the Finance Bill provisions helpful and suitable in encouraging the creation of further employee share ownership plans. I hope that the Minister realises that something must be done if that objective is to be achieved.

Mr. Lilley: To the shock, horror, and consternation of the Committee, I accept amendment No. 44. The matter could be dealt with in either of the two suggested ways, but the way suggested by the hon. Gentleman has, on balance, at least as many advantages as the way it is dealt with in the Bill. As I am in a good mood, I accept the amendment and urge my hon. Friends to support it in the unlikely event of a Division.
On amendment No. 45, given the valuable nature of the new capital gains relief, there are certain conditions which the Bill requires to be met if it is to be obtained. One of those is that within a certain period the ESOP must have a 10 per cent. stake in the company to which the sale relates. Unlike some other employee share arrangements recognised in the tax system, ESOPs will often be concerned with large stakes in companies.
The new relief proposed in the Bill is very valuable and it is right that it should be confined to cases where employees are being given a significant stake in the company. The level of what should count as significant is inevitably a matter of judgment. We think that 10 per cent. strikes the right balance, representing as it does a stake large enough to ensure the employees a degree of involvement in the company's affairs, while not being so large as to make the new relief unattractive. It was also the lowest figure suggested in representations made by the main ESOP proponents.
To remove the test altogether would mean that the new relief would be available if only a tiny proportion of the company's shares were to pass to the ESOP trust. That would mean that relief could be claimed where the employees were being given no effective stake in the company, and the proprietors maintained total effective control. We do not think that giving relief in such circumstances could be justified, and I urge the Committee to reject the amendment.
Clause 25(7) denies the capital gains relief for share disposals to ESOPs if the ESOP breaks the conditions for qualifying ESOPs in the period running from the year in which the share disposal takes place to the year in which replacement assets are acquired. Amendment No. 46 would allow relief to be claimed in those circumstances.
The main effect of the amendment would be extra compliance and administrative work. In the absence of clause 25(7), relief would be allowed and then clawed back under clauses 28 to 30, which recover the relief where, at any time after the sale of shares, the ESOP breaks the rules. In the cases covered by clause 25(7), it will usually be known when the claim is made that the ESOP has broken the rules, and in those circumstances it saves everyone work to deny the relief from the outset, as clause 25(7) does. For that reason, I cannot commend the amendment to the Committee, but I appreciate the manner in which the amendments were proposed.

Mr. Beith: I am grateful to the Minister for accepting amendment No. 44. I hope that it is a good sign and that we can further tidy up these parts of the Bill in Standing Committee. I hope that many other Liberal Democrat amendments will be accepted.
I fully appreciate and accept the reasoning behind the 10 per cent. threshold in general. However, I wonder whether the management buy-out aspect has been properly considered. To achieve a management buy-out, it is necessary for there to be a large institutional stake. If the managers are to be fully committed, they also require a significant stake. I shall take further advice on whether there is any other way to deal with that. I hope that the Minister's officials will also give it further thought. I am at one with the Minister in thinking that at least a 10 per cent. stake is usually desirable, but I should not want a management buy-out to be frustrated by that.
I shall reflect on the Minister's response to amendment No. 46. His key point was that in most cases relief will not be claimed until it is clear whether the trust has behaved as it should. My anxiety is that the person who will be denied the relief is the vendor, who has no control over the actions of those who could cause him to lose it. I appreciate the Minister's acceptance of amendment No. 44.

Amendment agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

Mr. Nicholas Brown: The clause is welcome and we do not wish to divide the House on this or subsequent clauses that deal with ESOPs. We wish only to explore technical matters of detail. I am sure that the clauses will go through Committee in a reasonably speedy and workmanlike way. That is in keeping with our approach during the past two years. This is the third year that we have discussed employee share ownership plans—or employee share ownership trusts, depending on which nomenclature people prefer.
The schemes appear to have drawn support from both sides of the House. We have arrived at a peculiar bipartisan approach, but for different reasons. Conservative Members view ESOPs as a form of popular capitalism, whereas we realise that they are an appropriate vehicle for workers' control, as our policy review makes clear.

Mr. Norman Lamont: It is the other way round.

Mr. Brown: I guess that the Chief Secretary is referring to the fact that workers' control has brought about appropriate vehicles because a large number of ESOPs are privatised bus companies—

Mr. Ian Taylor: That is a good joke.

Mr. Brown: It is all the better for being spontaneous.
The approach of the House to these issues was set during the passage of the Finance Bill last year by that opinion former, the man we thought of—just for a few minutes, no longer—as Red Norman. He said:
In a free enterprise economy, there is room for many different forms of ownership, which can include a number of companies where a majority of shares are owned by the labour force. If the increasing awareness of and interest in ESOPs results in more worker-owned companies, I should not regret that…Anything that could encourage more membership by the work force in the unquoted sector is to be welcomed."—[Official Report, Standing Committee G, 6 June 1989; columns 304–5.]
That ringing incitement to the work force to take over their companies made my hon. Friends and myself draw breath. Indeed, given his previous disappointments in the appointments to the Cabinet, we thought that the right hon. Gentleman was making a bid for election to the shadow Cabinet instead. For those few moments one or two of us might even have considered supporting him. Of course, events moved on, and we are pleased that the right hon. Gentleman has found his rightful place in the appropriate Cabinet and has not resiled from his views on employee share ownership trusts.
It is only fair to point out that all the trusts so far relate to private companies. That is the way in which the law to date has affected the transfer of shares in public companies. The hon. Member for Esher (Mr. Taylor) has spoken on the point on a number of occasions and may take justifiable pride in the clause that is before us. For the first time the measure will give an advantage to Finance Bill schemes over case law ESOPs, which many of us felt were hitherto in a more privileged position.
The clause, and those subsequent upon it, will provide roll-over tax relief if the shares are sold into an ESOP. That relief was not available before. The requirements for democratic distribution of the shares remain, as do the requirements for worker trustees. All that is on the right lines, but there are remaining problems, and the clause is wide enough for us to discuss them.
The overriding problem relates particularly to private companies. Although I mention it, it does not detract from my overall support for the clause. If a company is doing badly, there is not a great temptation to the work force to purchase it; naturally it would be reluctant to do so. If a company is doing well, unfortunately it is the case in British industry that those who run it want to retain it. There are still more tax-efficient methods of rewarding executives for the contribution that they make to the company. Indeed, it is widely felt in British board rooms that executives need incentives. The same view does not seem to have been transferred to the approach to the rest of the work force. Far too many British board rooms still seem to think that their work force needs to be competitive and priced down rather than given incentives and further involvement.
There are other difficulties that pertain particularly to the ESOT structure. It is still the case that a majority of the trustees of the ESOT have to be employees. I hope that the Financial Secretary will consider the matter again, perhaps not now but for future Finance Bills. I am sure that the commitment given by his predecessor to review the issue year by year continues. In the larger ESOTs, the need for professional, financial and other expert advice is not just


necessary but of overwhelming importance. No doubt some of the larger ESOTs could not function unless such professional advice was available.
In issues that are fairly complex, the existing employee trustees not only have to form a majority, and therefore take responsibility ultimately—if they are all voting the same way—for decisions, but they are also completely exposed to personal liability. I understand the reasons for it, but those two burdens are heavy ones to place on people who ideally should be shop floor workers. To mix their involvement with the involvement of professional advisers, experts in their own spheres, seems to be desirable. The burden of complete personal liability is very heavy and is not an inducement to an ordinary working person to seek election.
I want to take the opportunity to praise members of the different work forces in the road transport industry in particular and in other industries for having taken an adventurous step in coming forward to undertake a burdensome office on behalf of their fellow workers. It is a heavy responsibility to shoulder. The individuals to whom I have spoken are very conscious of that.
I also want to take the opportunity to praise the Unity Trust bank which, as hon. Members who follow the matter know, is the main financial backer of employee share ownership trusts. Without the encouragement that the bank has given to such schemes, many of them would not have got under way.
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The Financial Secretary should consider for future Financial Bills the inclusion in ESOTs of regular part-time workers as well as full-time employees. I am not talking about people on short-term contracts. I see the difficulties there, but it should be possible for people who are permanently employed, but for a smaller number of weeks, to be involved in the ESOT, even on a pro rata basis, although ideally they should have full-time involvement.
The new relief is designed to be limited to sales of shares in qualifying ESOPs. It will provide a boost for them at the expense of the case law ESOPs. As the Financial Secretary said in answer to the hon. Member for Berwick-upon-Tweed (Mr. Beith), the relief is limited by a number of tests. It is limited particularly to ESOPs set up by trading companies or trading groups. The Finance Act 1989 allowed investment companies to set up ESOPs. Indeed, no reason was put forward at the time as to why investment companies should not set up ESOPs.
Of course, it gave them the corporation tax deductions consequent upon that. However, clause 25 and the subsequent clauses will not allow an investment company ESOP the roll-over tax relief. I understand that tax avoidance issues may be involved. Given everything that I have said on tax avoidance in the past, it would be wrong for me not to be conscious of the potential. If the Financial Secretary says that that is his defence, I shall certainly understand his motivation. However, it is right to explore it further and that is what I hope to do.
I understand the position to be that a qualifying ESOP can be set up by a non-trading investment company—that was common ground on last year's Finance Act—and that the new roll-over relief cannot be claimed for the sale of shares in such a company to its ESOP. That is what we are deciding this year. I accept that it is in line with the general

view of the Inland Revenue that trading companies or groups are more commercial and less easy to manipulate for tax purposes. That is probably right.
However, we have to ask whether the Government's approach is wholly consistent. If investment companies are intrinsically undesirable, why should we have allowed them to establish qualifying ESOPs in the first place? If clause 25 and the succeeding clauses are intended to encourage shareholders to sell to ESOPs rather than to creditors or others, how does the restriction help? I do not put those questions to the Financial Secretary in a spirit of animosity, because I realise that tax avoidance issues may sit alongside my remarks. Nevertheless, I shall welcome a response from him in his summation of the debate.
The hon. Member for Berwick-upon-Tweed referred to the 10 per cent. test contained in clause 25(4). As a test, it is arbitrary, and I was much taken with the Financial Secretary's statement that it represented the lowest test of all the representations that the Government received from interested groups.
Why is such a test needed? Although I followed what the Financial Secretary said to the hon. Member for Berwick-upon-Tweed, that question still merits an answer, because, although the 10 per cent. test is less strict than the 25 per cent. test used at one stage in the Capital Gains Tax Act 1979, it is stricter than the section 85 rule, for general offers, which has no threshold.
If an ESOP currently holds 2 per cent. of the founding company's shares, why should relief be available if Peter sells 8 per cent. of his 29 per cent. shareholding, but not be available to Nick if he sells all of his 7 per cent. shareholding? Why should relief become available to Nick only if Peter later decides to sell 2 per cent. of his shareholding to the ESOP? The threshold sets up those ambiguities. Has the Financial Secretary thought of a way through, or does he believe that such ambiguities are consequent upon the setting of any threshold? I suspect that that is the answer.
I must raise a number of drafting issues with the Financial Secretary. Clause 25(5) states that the claimant must obtain consideration. That would be difficult to interpret and I am not sure that it is right. Can the Financial Secretary justify inclusion of that phrase in the clause? Similarly, in clause 25(7), am I to understand—I may have got it wrong—that a small chargeable event could mean that roll-over relief would be completely denied? I am sure that that is not the Government's intention, but the clause could be interpreted in such a way. Could the Financial Secretary respond a little more fully than simply to say that that is not his intention, and that it could not be interpreted in such a way?
Clause 25(5) states that all the consideration must be used to purchase replacement assets. Surely that is contradicted by clause 27(2), which we shall discuss further in Standing Committee. At this stage, I merely want to draw the Financial Secretary's attention to the fact that clause 27(2) and clause 27(3) enable partial roll-over relief. If that is enabled by clause 27, why should clause 25(5) say that it is not?
In principle, the relief given in clause 25 is much wider than existing roll-over relief. It extends to the acquisition of almost any type of chargeable asset and to assets the eventual sale of which is unlikely in practice to cause capital gains tax to be paid.
I must return to the issue of tax avoidance, where my sympathies are entirely with the Inland Revenue. The clause may provide substantial possibilities for avoidance, and I should like the Financial Secretary to tell us how much consideration the Government have given to that issue and precisely what steps they have taken to minimise avoidance, which is implicit in the clause.
Relief is aimed principally at sales of shares to an ESOP at full market value. How will the clause cope with what I should have thought were socially desirable steps—I should have thought that they were desirable to the Government, too—for example, when shares are gifted to an ESOP or sold at a lower or nominal value? I am sure that the Government will have considered that matter in general, but how does the clause affect it in particular? I am sure that we would all agree that the sort of thing to be encountered is when the owner of a small or medium-sized company, which is not asset-rich, is retiring or seeking to leave for other reasons and the company can be given over to the work force. The tax system should positively encourage such an idea. As the hon. Member for Esher has said in previous debates, at least the system should not provide a positive disincentive.
As I am sure hon. Members will appreciate, these are technical matters and they are difficult to popularise. Nevertheless, the events that lie behind the drier points that we are discussing today are serious, and have had a profound effect on the lives of a number of working people, whose companies have been transformed from municipally owned undertakings or companies that traded in the public sector into employee share ownership trusts.
Many trade union branches have been involved in such transfers. The bus industry is the prime example. Unions had to think long and hard before encouraging their members to enter into such undertakings. I note on the latest list of such groups that the Buswise group on Tyne and Wear, with some 18,000 employees, is by far the largest existing ESOP.
My constituents ask me whether they should enter into such an undertaking. They also ask, as well they might, given my current duties on the Opposition Front Bench, what will happen when the Government change. Will their investment in the ESOP be for naught? Will the risk that they have taken come to nothing if the municipal bus trust is taken back into public ownership'? It is not our intention to take such trusts back into public ownership. Our commitment to an integrated passenger transport network in the metropolitan areas can be carried out without renationalising enterprises which we regret have been put into such difficult positions.
I applaud the endeavours of employees of ESOPs to take the best possible option available to them in the most intractable circumstances. They were placed in such circumstances by the Government and not due to economic circumstances or anything else. They have taken a brave step and next year, or the year after, we may well be discussing the affairs of people working in community care who are also considering whether, given the changes that the Government are making, ESOPs are the vehicle for them. People in that walk of life are looking carefully at what has happened in the bus industry.
ESOPs have a much wider future than merely providing a refuge of last resort for municipal undertakings that are being privatised. I regret that debate has sometimes been too narrowly focused on privatisation. There are many good things about ESOPs and I hope that, with continued

encouragement from the Opposition and, in fairness, with the good will that has come from the Government as well, albeit for different reasons, we shall eventually arrive at the point where ESOPs are not only desirable in theory but positively attractive in practice.

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Mr. Ian Taylor: It is an annual pleasure to follow the jovial hon. Member for Newcastle upon Tyne, East (Mr. Brown) in debates on employee share ownership, and today is no exception. I will pass on to him a message given to me by the managing director of another bus company, who said that, when the shares passed into the hands of the workers in that bus company, for the first time the buses stopped for passengers, so there is hope for the hon. Gentleman if he is late for a meeting in Tyne and Wear.
This is one of the remarkable subjects that seems to unite the House. It unites the supporters of Karl Marx and Adam Smith and, in deference to the hon. Member for Berwick-upon-Tweed (Mr. Beith), probably Lloyd George —I do not know the latest guru of the Liberal Democrats.
Just to show that I am a good party man at heart, I should say that, although the hon. Member for Newcastle upon Tyne, East said that he saw ESOPs as a means of workers' control, it is important that he should explain to some of his colleagues that workers may end up in control through a progressive transfer of shares into their hands which, if it happens, is a good thing, but that workers' control, in some sort of socialist sense, should not be the sole justification for employee ownership. It is better to start at 1, 2 or 3 per cent. if that is all that is possible, than to hold out for 51 per cent. I have often found on platforms that that understanding has not spread completely through the Labour party, but I am sure that the hon. Gentleman will continue to spread the gospel of popular capitalism, even if he calls it something else.
I welcome clause 25. It represents satisfaction of one of the most important of the submissions that were made to the Treasury last year when we were considering some of the implications of the introduction of the qualifying ESOP in the Finance Act 1989. I also particularly welcome the 10 per cent. criterion. The Americans have a 30 per cent. criterion, so the Treasury has been excessively generous. I withdraw the word "excessively" as it might set a precedent, but the Treasury has certainly been generous in bringing in the 10 per cent. criterion.
My only worry would be that 10 per cent. is still a substantial number of shares if they all come in one go. One thing that we shall be looking at in Standing Committee is whether it is possible, using only the 1978 Act scheme, for 10 per cent. of a company to pass out to shareholders during the seven-year period, which is one of the qualifying conditions. That is in no way a criticism —it is merely an attempt to ensure that there is a possibility of understanding whether the seven-year rule is sufficient.
Sadly, during the past year there has been difficulty in persuading companies to use the qualifying employee share ownership trust set up in last year's Finance Act. Trusts have been set up under the case law, as the hon. Member for Newcastle upon Tyne, East said, but those of us who believe that this should become a proper system, widely understood, with clear tax provisions, welcome the fact that it is proposed that, under clause 25, the roll-over relief will apply only to transfers of shares into a qualifying


share option trust. That seems to make the qualifying route much more popular and is certainly a boost to it in comparison with the case law version.
I want briefly to draw attention to two other points which could transform some of the attitudes of potential appliers of ESOPs because they were not available until recently. The first is the fact that the Companies Act 1989 came into force on 1 April 1990. That was an important provision, giving companies the ability to guarantee the borrowings of an employee benefit trust. That is something which many of us wanted early on, and now that it has come in, I think that it will attract the attention of practitioners.
I was delighted when my hon. Friend the Financial Secretary announced in a written answer on 9 May—at column 123 of Hansard—that a clearance procedure was to be introduced, and was under discussion by the Inland Revenue. Tax advisers are used to telephoning the Inland Revenue and obtaining clearance procedures for other financial purposes. Given the complexities of employee share ownership schemes, and the similarity of terms provisions, they felt that such procedures were necessary here.
In many instances, lack of clearance procedure made the case law version more desirable. The matter needed to be tidied up, and I thank my hon. Friend the Financial Secretary for doing that.
I believe that the Treasury could make further gestures to remove some of the cotton wool around the employee share ownership plan. All the hon. Members who have spoken tonight want the ESOP scheme to expand. If it is to expand, companies and their advisers must regard it as a vehicle that is not only a sensible way to spread capital to workers, but something that will not cause horrendous corporate problems. It must be something that firms see as meeting their objectives.
Although I have always favoured the similarity of terms provisions, I have a slight doubt as to whether we should always insist upon it, as it seems to be a disincentive for many firms which cannot decide whether to introduce the schemes. Some firms seem not to believe that running an ESOP with similarity of terms provisions in parallel with the 1984 executive share option scheme is sufficient. To date I have always thought that it was, but there is an increasing volume of evidence to the contrary.
The hon. Member for Newcastle upon Tyne, East raised some good points about part-time workers. Increasingly, they will be an essential part of any labour force, and part-time workers who have a proper contract should be beneficiaries under an employee share ownership plan.
In Committee last year I raised the question of capital gains tax liability within a trust if the trust disburses shares at a higher price than that at which it first bought them that would involve double taxation.
It is interesting that many of the people who advise companies on whether to adopt a qualifying employee share trust—especially those from the Unity Trust bank —are concerned about the trustee clauses, not only in regard to personal liability but because of the complexity of an election among the workers. My hon. Friend the Financial Secretary should consider whether there should be an alternative system. Appointing as trustees one

representative each from the work force and management, plus an independent adviser, would simplify matters. That is not an anti-union suggestion—I think that it would find widespread support among Opposition Members.
As for the seven-year period during which shares must be distributed to the individual beneficiaries, I support the requirement to get shares into the hands of individuals as soon as possible. That is an essential part of individual share ownership, which is inherent in the employee share ownership trust principle. We are not moving into an institutional shareholding area. The problem emerges when a substantial number of shares could be obtained by the employee trust. It is then difficult to get them out within the seven-year period if only the 1978 Act is used, particularly if a company wanted to make available one 1978 Act share plus one other share, difficulties would be involved. We may need to consider either extending the period or altering the point at which tax arises when a share is distributed to an employee outside a 1978 Act scheme. Perhaps employees could get some roll-over relief so that they pay tax when they realise a share as opposed to when they receive it.
There is not time to discuss technical matters this evening, but in fairness to the Standing Committee, it was worth while flagging them. The Government have done an excellent job. Industry and practitioners have been flabby and slightly weak-willed about introducing the scheme. I hope that we can now toughen them up. The giving of taxation reliefs only to a qualifying trust should make that much more attractive, and I hope that in the coming months we shall see a fairly rapid and wide rise of employees becoming shareholders through that system. That would be extremely welcome. One of the great objectives of the next 10 years is spreading capital through share ownership. This is one measure in which the Government can justifiably take pride.

Mr. Lilley: We have had an excellent debate with knowledgeable speeches by the hon. Member for Newcastle upon Tyne, East (Mr. Brown) and my hon. Friend the Member for Esher (Mr. Taylor), both of whom have acquired expertise outside the House and, I suspect, from paying more attention to finance debates than I did previously. I have had to make up for lost time in studying this important subject.
It is useful to know that, having said a few words in favour of co-operatives, if I now advocate ESOPs as a vehicle for worker control I can hope to pick up some votes in the Labour party national executive elections, should I be so inclined. I was a little surprised by some of the inquiries of the hon. Member for Newcastle upon Tyne, East, who did not feel it was necessary to have a majority of worker trustees or to transfer a minimum amount to employees. I thought that he might have been making a bid for membership of our Cabinet, so that he and I could pass en route.
The Government have consistently supported and encouraged employee share ownership. Privatisations have always included valuable and widely seized opportunities for employees to obtain shares on very favourable terms and, more generally, we have introduced and extended a wide range of tax relief in 10 out of the last 11 annual Budgets. We estimate that up to March last year, the latest date for which figures are available,


all-employee share schemes resulted in 2 million employees receiving shares or options over shares with an intitial market value of some £5 billion.
Against that background, we introduced our legislation on ESOPs last year. My right hon. Friend explained then the difference between approved employee share schemes and ESOPs, and acknowledged that ESOPs have a particular role to play in the unquoted company sector.
The clauses provide a futher tax relief to encourage the establishment of statutory ESOPs. The relief takes the form of a capital gains tax deferral for sales of shares to ESOPs. The clauses set out the conditions to be met if relief is to be obtained, the nature of the relief and provide for its recovery if the statutory ESOP subsequently ceases to meet the qualifying conditions.
ESOPs involve trusts, set up for the benefit of a company's employees, which invest in the company's shares and then distribute them to its work force.
Following discussions with the main proponents of ESOPs, sections 67 to 74 and schedule 5 of last year's Finance Act provided relief from corporation tax for company contributions to ESOP trusts. Relief is due provided certain conditions are met. They are designed to secure the Government's objectives for ESOPs. First, individual employee share ownership in the companies in which they work should be extended. Secondly, it should be on an all-employee, similar-terms basis. That is valuable, despite the slight wavering of my hon. Friend the Member for Esher. Such ownership should he provided as promptly as possible, and it should be under arrangements that do not lend themselves to the sort of criticism that we have heard of ESOPs abroad, where they can be used for poison pill operations and the like.
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In line with the commitment given by my predecessor during last year's Standing Committee debates, we have kept a close watch on developments, and I have had meetings with those most closely concerned with promoting ESOPs.
The case for giving a further incentive to ESOPs has been strongly put to us, and, consistent with our underlying aim of ensuring individual employee ownership on reasonable terms and within a reasonable time, we have decided to demonstrate our continued commitment to ESOPs by introducing this further relief. We hope that this up-front capital gains tax relief will make the difference in some cases between a company deciding to set up an ESOP or not. We hope that the existence of the relief will persuade owners of shares in unquoted companies to sell them to an ESOP. Comments made since the Budget strengthen our hope that that will be so.
I am grateful to my hon. Friend the Member for Esher and the hon. Member for Newcastle upon Tyne, East for the broad support that they have given to the relief, and I welcome their contributions. My hon. Friend the Member for Esher, who has established a position as probably the leading exponent of ESOPs in the House, welcomed our 10 per cent. rule and remarked that it was more generous than the 30 per cent. rule that obtains in the United States of America. None the less, he wondered whether it might prove higher than necessary. ESOPs will often be concerned with large stakes in the company concerned. They may often rely on borrowings and individual contributions; distributions may, in consequence, take

some time. Up to seven years is allowed under the 1989 legislation; a 1·4 per cent. per annum transfer does not seem excessive.
My hon. Friend the Member for Esher correctly remarked that the changes under the Companies Act 1989 have only just come into effect and that they will provide greater stimulus to statutory ESOPs, along with the new incentive. The fact that Companies Act changes have only recently come into force may be why we have not seen much sign of activity in statutory ESOPs. We would not expect to know about them because it takes some time before they come to the notice of the authorities.
My hon. Friend welcomed the clearance procedure that I recently announced. He said that it was under consideration, but it is established and available to those setting up trusts.
My hon. Friend reinforced the inquiry made by the hon. Member for Newcastle upon Tyne, East about the position of part-time workers. ESOPs can distribute to part-time workers as long as they are distributed through an approved all-employee arrangement.
The last point that my hon. Friend the Member for Esher made was about capital gains tax if shares are sold at a higher price than that for which they were acquired. We have received some interest, but not much. Given the freedom of operation available to ESOPs, unlike approved employee share schemes, large amounts could be involved and there would be the risk, if these reliefs were given, of ESOPs being used solely as tax shelters. We are determined that that should not happen. ESOPs should serve only as a means of furthering individual employee share ownership and as a means of producing it without unnecessary delay. To exempt their income and gains would encourage ESOPs to delay for as long as possible the distribution of shares to employees.
The hon. Member for Newcastle upon Tyne, East made constructively comments. He said that, if a company was doing badly, employees would not wish to take up shares via an ESOP and that, if it was doing well, they would not be able to afford to do so. In fact, quite a number of ESOPs are the result of shares being gifted to employees. I am happy to say that all the schemes of which I am aware are in successful companies. They seem to have overcome the obstacles foreseen by the hon. Gentleman.
Perhaps I can spell out a little more clearly the position of part-time employees. The benefits for an ESOP trust could be substantial and, although distributions must be on an all-employee similar terms basis, there is scope for variation, depending on length of service and level of remuneration. It seems right to restrict those benefits to those who make the most substantial contributions to the success of their company. If, however, the ESOP trust operates in conjunction with a profit-sharing scheme trust, where the tax relief is more narrowly confined, part-time employees may still be allowed to benefit, as they frequently are under these schemes.

Mr. Beith: Will the hon. Gentleman settle for the first answer?

Mr. Lilley: The answers are more or less the same. If the hon. Gentleman studies the text, he will find that one answer was more condensed than the other.
The hon. Member for Newcastle upon Tyne, East said that shop floor workers who are trustees bear full liability and that this is a burdensome responsibility. In fact,


companies are able to indemnify them against the responsibility. That would ease the burden and help employee trustees to play a full part, which is what we want to happen.
Exclusion of relief for investment companies was tentatively queried by the hon. Member for Newcastle upon Tyne, East. He was right in his suspicion that this restriction has been introduced to prevent tax avoidance. Our contacts with proponents of ESOPs suggest that interest in the new relief is likely to be related essentially to trading companies. If the relief were extended to investment companies, there would be a risk of it being abused for what are really sales and transfers of investments to third parties. I know that the hon. Gentleman would not wish that to happen any more than I do.
The hon. Gentleman made a number of inquiries about drafting matters. Clause 25(5) deals with whether the claimant must obtain consideration—CGT jargon for a sale. Normally gifts already attract CGT deferral under last year's rules for gifts. The hon. Gentleman asked whether under clause 25(7) even a small chargeable event would deny relief. I am afraid that that is the case. Substantial scope for abuse would be opened up if we differentiated between small and large-scale chargeable events. Again, this measure was introduced to prevent tax avoidance.
The hon. Gentleman asked whether relief was confined to all cases where all proceeds were reinvested. No; clause 27(3) extends relief to cases where part is reinvested. I was asked how the provisions would cope in terms of shares gifted to ESOPs. In most cases, gift holdover relief will be available where shares are given to ESOPs and, where it is not, the new relief will be available.
I hope that I have dealt with most of the points raised by the hon. Member for Newcastle upon Tyne, East. If on studying the Official Report I find that questions have not been answered or have been inadequately answered, I shall either write to him or take the opportunity in the pleasurable meetings which we are scheduled to hold on Tuesdays and Thursdays henceforth to respond more fully to his points. I am grateful for hon. Members' constructive and knowledgeable contributions to the debate.

Question put and agreed to.

Clause 25, as amended, ordered to stand part of the Bill.

Bill (Clauses 3, 9, 10, 20, 23, 25 and 68), reported, with amendments; to lie upon the Table.

Orders of the Day — Personal Equity Plans

Mr. Chris Smith: I beg to move,
That the Personal Equity Plan (Amendment) Regulations 1990 (S.I., 1990, No. 678), dated 20th March 1990, a copy of which was laid before this House on 21st March, be revoked.
We tabled a prayer on these regulations because we thought that it would be useful to discuss some of the issues of anxiety to which the personal equity plan system and the changes proposed in the statutory instrument give rise. We do not intend to divide the House on the matter, but we wish to flag up several issues which give us pause for thought.
Personal equity plans were initially announced in the Budget of March 1986 with a start date in January the following year. At that stage, a limit of £2,400 was placed on the annual investment qualifying for a PEP. Provided that the shares were held for a minimum period of between 12 and 24 months, any capital gains and reinvestment dividends were free of tax. In the 1988 Budget, the annual limit was raised from £2,400 to £3,000. In 1989, the annual limit was raised again, from £3,000 to £4,800. It is worth recalling that the overall increase was well over 50 per cent.
The regulations before us raise that annual limit of £4,800 still further, to £6,000. That is a 25 per cent. increase in one calendar year. The House will note that the successive increases in each of the three years were well over the rate of inflation. The overall increases in the annual limit are extremely generous. Therefore, it was with some surprise that when I looked at the Red Book to see what figure was included for the cost of the changes to personal equity plans this year, I found that the item was marked as carrying a negligible cost.
Given the fairly dramatic increase in take-up of PEPs in the past 12 months, I fail to understand why the cost of a substantial increase in the annual limit can be regarded as negligible. It will lead—admittedly with a time lag of at least a year—to considerable taxation benefits in terms both of capital gains and of income tax on dividends. It would be useful to have some further thoughts from the Financial Secretary about why that estimate has been included in the Red Book.
We have a number of criticisms to make of personal equity plans in general. I should make it clear, as I have done a number of times to many different audiences in the City and elsewhere, that Labour Members will honour the tax treatment of those shares that are included in the PEPs portfolios, and the income from them, when we come to Government.
Our criticisms of PEPs are, first, that they have tended to benefit larger investors, repackaging existing portfolios of shares, rather than encourage new investors to come into the equity market. The Financial Secretary will doubtless recall that when we had an extremely interesting discussion on that precise point about a year ago the then Financial Secretary, now elevated to Chief Secretary, maintained that the take-up of PEPs was being substantially generated by new, small savers, rather than by larger investors.
We did not agree then, and we do not agree now, as experience and logic seem to show that precisely the opposite is the case. That is especially true in logic, because, to take best advantage of a PEP, remembering


that the key advantage lies in capital gains tax relief rather than income tax relief, one has to have already exceeded the £5,000 threshold for capital gains tax purposes. The small-scale saver with a handful of shares will certainly not find himself in that position. Studies carried out by the Institute for Fiscal Studies seem to show that, by and large, PEPs are being used by people with large-scale shareholdings, and the benefits are considerable in those cases.
Secondly, we doubt whether it is wise to have accorded PEPs far more favourable tax treatment than any other sort of saving. When we debated PEPs last year, one matter that I pressed on the Government was the removal of the composite rate tax system for building society interest. I am delighted that the Government actually listened to that, albeit a year later.
We find it odd, however, that PEPs have been given such special treatment within the tax system, even after the additional boost to savings of a number of different kinds that the Finance Bill and Budget have provided. For example, the increase in the annual limit for PEPs has gone up by well over 100 per cent. in two years. That is in contrast with the treatment in the Finance Bill of the tax-exempt limit for friendly societies, which we shall be discussing soon in Standing Committee. The increase in that limit has been from £100 to £150—an overall increase of 50 per cent., and the last increase was five years ago. The contrast becomes absolutely clear—a more than 100 per cent. increase in the overall limit for PEPs over three years, but a figure of 50 per cent. over five years for friendly societies. We do not regard that as even-handed.
Thirdly, we believe that PEPs by and large serve in the equity markets merely to recycle existing equities. Of course there is a place in the economy for such recycling. but do we really want to give such generous tax treatment to encourage it? On the whole, PEPs do not encourage or facilitate the creation of new wealth or enterprise—they encourage people to continue making profits out of existing wealth and enterprise.

Mr. Gerald Bermingham: Does my hon. Friend agree that, if PEPs were structured so as to include employee shareholders within companies, that might be a way of encouraging employees of companies to take, by way of bonus or other dividend, shares within the company for which they work, thus giving them greater involvement within the company?

Mr. Smith: I do not think that my hon. Friend was present for our last debate, when my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) set out in extremely learned and expert fashion the constructive view that we take of employee share ownership trusts. In our view, they are perhaps a more appropriate and useful vehicle for encouraging share-owning participation by workers in their companies than the sort of scheme that my hon. Friend has in mind.
Nevertheless, I would point out to my hon. Friend, for whom I have great respect, that his idea is an important one. We should certainly want to examine ways of using the tax system to encourage new enterprise and business in our economy, but I fear that PEPs are a very badly targeted vehicle for achieving that end. That is why we have doubts about the precise benefits that PEPs, with their enormous tax advantages, can bring.
The statutory instrument has two major defects, the first of which—the rise in the annual limit from £4,800 to £6,000—I have already mentioned briefly. There is a danger that that substantial increase may render nugatory all the other changes to improve savings of other sorts that the Chancellor is making in the Finance Bill. If we advance the case in the tax system for PEPs by a much greater amount than the case for other forms of saving, other forms of personal saving are not necessarily thereby improved.
Our second and more important criticism of the order relates to regulation 7, which reduces to 50 per cent. the value of investments that must be held by unit trusts, funds of funds and investment trusts in United Kingdom companies. In other words, regulation 7 makes it easier for holders of PEPs, by means of various trusts and funds of funds, to hold their investments abroad instead of in this country.
The issue arose briefly during our discussions a year ago. At that time, the then Financial Secretary to the Treasury, now the Chief Secretary and presumably one of the authors of the document before us, said:
we thought it only right to require that unit and investment trusts should invest mostly in United Kingdom equities."—[Official Report, 10 May 1989; Vol. 152, c. 951.]
We agree with that, but we now find a year later that the Government are placing before the House an order which reduces that requirement to 50 per cent. Tax relief should not be generously available on income derived from investments up to 50 per cent. of which can be held abroad.
Government policy should be not just about encouraging saving but about encouraging investment in Britain. The change in regulation 7 goes completely in the wrong direction. That is a grave error and we hope that the Government will have second thoughts. Despite our criticisms of PEPs as a whole, we think that the system should be used as far as possible to encourage investment in United Kingdom equities. Providing tax advantages and tax relief to facilitate investment abroad is not one of the priorities for which we want to see the tax system used.

Mr. A. J. Beith: I was reassured to hear that the hon. Member for Islington, South and Finsbury (Mr. Smith) does not wish to divide the House this year. He divided the House and voted against the PEP scheme in the equivalent debate last year. That could be a milestone on the long road that the Labour party is taking towards popular capitalism, but we must not get too excited. Perhaps some of the hon. Gentleman's comments gave a rather different impression.
The Minister knows that I have been a critic of the PEP scheme from the start, not because I disagree with its objectives but because I do not think that it went far enough to meet them and in particular it did not go far enough to meet the objectives of extending share ownership to the largest possible number of people. That remains my criticism of the scheme and that is why I shall suggest further changes that should be made to it.
Before the Budget we outlined a series of measures designed to boost savings, and widen savings and share ownership. I am pleased to say that the Government have moved on some of our suggestions. The first of the three key elements that we suggest now, just as we did last year, is the abolition of composite rate tax on building society and bank accounts. I am pleased that the Government


propose to do that in a year. The second is the extending of PEPs to bank and building society accounts, which to a large extent is met by the TESSA scheme. Our third measure is the creation of an alternative PEP scheme for people who are not liable to capital gains tax. The Government have not adopted that suggestion and have not yet addressed the issue.
The only major benefit of a PEP scheme is the capital gains tax relief that it provides. By definition, the vast majority of people whom one might wish to encourage to take out a PEP as an objective of widening share ownership have no capital gains tax liability at all. The people who are most likely to benefit from the present scheme are those who have already used up their considerable capital gains tax relief and must therefore possess a fairly substantial portfolio of shares in any case.
If the scheme is to be widened, it must contain reliefs that make it attractive to people who do not have any capital gains tax liability and are first-time share buyers or people who may at the moment own shares in one or two privatised companies, or perhaps in three such companies, and whose total portfolio is only £1,000. They will have no capital gains tax to pay, so they are a long way from needing such relief. Therefore, there must be some other form of relief. They get relief on dividends, but we know that that is small, and less than they would get if they had the same money in a bank or building society, as the divident income would be less than that from a bank deposit.
Our proposal was that there should be an alternative PEP scheme giving front-ended income tax relief on the money deposited in the scheme, but that nobody should be allowed to have both types of scheme. That would mean, if one was offering it to large numbers of people who have no or only a few shares, the opportunity of a real and encouraging tax relief. If the Government are serious about widening share ownership by means other than employee share ownership plans, they must widen the scheme in such a way. That is easily the most promising route to take if the PEP scheme is to fulfil the purposes for which it was originally set up.
The hon. Member for Hackney, North and Stoke Newington (Ms. Abbott), who serves on the Select Committee on the Treasury and Civil Service, referred to the exchanges in the evidence sessions of that Committee about whether this was a Budget to increase savings. The Chancellor was careful in his choice of words when questioned on the subject. He said that it was not a Budget for savings but a Budget for savers. In other words, it gave certain advantages to those who chose to save. He held out no hope that it would greatly extend or increase the amount of saving in the economy. Many people agree. I hope that there will be some increase.
A different social purpose would be achieved by widening the number of people who save, even if that did not increase greatly the savings ratio. It is socially desirable that more people should be encouraged to save and develop the habit of saving and that ownership of industry should be much wider. Therefore, the Government have missed the boat in not developing PEP in the way that I have suggested. That does not lead me to resist the changes that they are making this year, some of which will prove useful
The hon. Member for Islington, South and Finsbury referred to a point that came up both last year and this year, which is about what was last year the 75 per cent. rule, which will become this year the 50 per cent. rule, on the amount of investments by a trust that can be made overseas. That presents a problem to the Government. It appears to me to be a breach of the Prime Minister's Madrid conditions for entering the exchange rate mechanism. It is a restriction on capital movements of the sort that she told all other European Countries they must get rid of before Britain would join the ERM.
That point was emphasised and repeated by Lord Joseph in an article in the Financial Times, I think today. The Government had better produce an answer on that. This year, they have reduced the restriction from 75 to 50 per cent. but that restriction is still inconsistent with the principle of the single market and free movement of capital. The Government may say that it is a bargaining counter and that when other countries remove their restrictions we shall remove ours.
The widening of savings and share ownership is desirable. I shall support the Government's improvement of PEP but I wish that they would go much further.

Mr. Gerald Bermingham: When I intervened in the speech of my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), I received the reply that my point had been partly dealt with in an earlier debate. I also received the assurance that my party is beginning to think along the lines of what is best for the capital market and the investment market. I suppose that I should declare a disappointed interest in PEP in that, in 1988, I bought into a scheme. It must be about the only one that ever lost money, and it managed to do so faster than the stock market was going down. I became a little disillusioned.
I have watched the limit rise from £3,000 to £4,800 and now to £6,000 and I have listened to what has been said about capital gains tax allowances. All the time one asks oneself, "What is the Treasury playing at?" We have PEPs, which have nil capital gains tax as long as one remains within their terms. In the old days there would be part unit trusts and part shares in the capital market. There had to be management, of course, and a great deal of money was made managing. Managers are now trying to reduce their charges and are becoming terribly competitive. The Government are allowing the unit trust element to fall to 50 per cent., and that means that 50 per cent. of the unit trust element will be invested abroad. More capital is leaving the country, and one begins to wonder what the Government are playing at.
The Government introduced similar schemes that were capital gains tax-free provided that they were held for long enough. Again, what are the Government playing at? Are they in favour of CGT or are they not? They are encouraging people to find schemes whereby they avoid CGT. If I had been sitting on the Government Benches last year listening to the Budget statement, I should have blown my top trying to think, as Conservative Members should, what the Government were doing. Effectively, they increased CGT by 33 per cent. They took it from 30 per cent. to 40 per cent. That was done by a Government who are meant to be interested in capital. There are schemes to avoid CGT, the Government have increased the rate of


CGT and at the same time they are driving industry towards considering shareholdings from an income-providing point of view, not from the standpoint of capital growth. That means that companies have to pay a dividend, so capital flow is reduced. Companies have to borrow from the banks, which are doing rather nicely with a current borrowing rate of about 18 per cent. That is doing nothing to help industry.
My remarks are not Labour party policy and I may have to answer for some of them later, but be that as it may. If we try to apply a purely logical mind to capital investment in industry, we must ask whether we are to encourage investment for capital growth or income return. If people want income return, the obvious answer is to encourage them to invest in building societies, for example. The Japanese do things extremely well if a capital return is required. They encourage investment in companies with a view to capital growth. They do not discourage that by having the majority of investment taxed at 40 per cent., which is the income tax rate in any event. We do not encourage the small investor by taxing him because he invests in a single investment whereas if he goes to a managed fund he may well escape CGT.
If we encourage people to invest for capital growth by, for example, coupling the investment with a provision that states that if dividend is reinvested it will not be subject to taxation, there is a logical approach to be perceived. It is a fairly rational idea that is employed elsewhere. It stops companies distributing moneys, it allows reinvestment in the company and at the same time it means that companies do not have to borrow. With that approach I can understand people being encouraged to invest.
By and large, the small investor does not invest for income. He puts money away for a rainy day, and sometimes for the children. Sometimes he is making provision for something that will confront him in five or 10 years' time. If he realises that he will not pay tax on capital growth, there will be a considerable incentive for him to invest.
I appreciate that the fund managers will say, "If the pension funds find that there is no such thing as capital gains tax any more and there is only capital growth, not income growth, how are pensions to be paid?" I understand the argument, but logic tells me that the managers will dispose of some of their shareholdings from time to time. That might make the market move around a little.
At the end of the day, what is the logic of PEPs? Either we believe in capital gains tax or we do not. Perhaps the Minister will care to answer my question: do the Government believe in capital investment, or do they not? Do they believe in capital gains tax? If they do, why should two schemes be exempt from capital gains tax provided that they are held for long enough? If there is to be capital gains tax, let it be upon every gain.
If the Government do not believe in capital gains tax, they should have the courage to say so. Their action last year in raising it from 30 per cent. to 40 per cent. shows little sense if they do not believe in it, and they should abolish it. The market could then reconsider the value of capital growth as opposed to income growth. The Government must not play around. They should not use the idea of investment abroad together with an increase in the percentages because that encourages capital outflow

rather than capital inflow and investment in Britain. The Government should come clean. It is either one or the other.
I am interested to know where the Government stand. The next general election cannot be too far away, and I am interested in what the Government propose thereafter. Will Britain become just an offshore island of Europe, or will we once again encourage investment in British industry? Will we encourage British industry to expand? Will we encourage fund managers to invest in British industry rather than abroad?
I hope that the Minister will give us a clue about the direction of his thoughts. If he is not thinking, and if his Department is not thinking, but simply dealing with each issue as and when it arises, please say so. At least that would be an honest answer and the House is entitled to know.

The Financial Secretary to the Treasury (Mr. Peter Lilley): I thank the Opposition for providing an opportunity once again to debate personal equity plans, which are a tremendous Government success story. The success of our policies is evident in the figures from the latest stock exchange share ownership survey published at the time of the Budget. About 11 million people, or one adult in every four, now owns shares, compared with one in 14 in 1979. Share ownership is widely spread—two thirds of share owners are outside the ranks of professionals and managers and 60 per cent. are outside the south-east.
The Government remain committed to widening and deepening share ownership, building on the remarkable achievements to date, and PEPs are playing their full part in that. The effect of the measures that we have introduced to improve the attractiveness of PEPs is shown in the figures that I gave the House on 23 February. They showed that, by 31 December 1989, the number of plan managers had risen to 340 compared with 180 a year earlier. Some 300,000 plans were taken out in 1989 and the total amount contributed to PEPs has risen to 1.5 billion, not counting investment growth.
I am pleased to give the House the latest provisional figures for 5 April this year. In 1989–90, 400,000 plans were taken out and £1,200 million invested, both figures setting new records for PEPs. That brings the total number of plans taken out since PEPs started to nearly 850,000, and the total invested—ignoring investment growth—to almost £2 billion. Those figures do not reflect the impact of the changes that we announced in this year's Budget, which were implemented in the regulations that we are debating today.
In the Budget, my right hon. Friend the Chancellor made four significant further improvements to personal equity plans. First, the overall annual limit on annual investment goes up from £4,800 to £6,000. Secondly, the limit on qualifying unit and investment trusts rises from £2,400 to £3,000. Thirdly, the rule for qualifying unit and investment trusts is relaxed—they now need to hold at least 50 per cent. rather than 75 per cent. of their portfolio in United Kingdom ordinary shares. Fourthly, the amount which can be invested in unit and investment trusts not meeting that requirement goes up from £750 to £900.
Those measures are an important component of my right hon. Friend's Budget for savers. They will increase


the amount that individuals can save, increase incentive for managers to market schemes, and remove obstacles facing investment trusts.
Those four changes are the meat of the regulations before us, but the regulations also sweep up some technical relaxations and clarifications which we announced last year. For example, regulation 6(1) clarifies the market value rule in the light of comments made by the Select Committee on Statutory Instruments last year. All in all, the effect of the changes in the regulations should be to make PEPs still more attractive. I look forward to an even more successful year than the last.
The hon. Member for Islington, South and Finsbury (Mr. Smith) asked why the cost of the relief is negligible, given the excellent take-up to which I have referred.

It being Ten o'clock, the debate stood adjourned.

Ordered,
That, at this day's sitting, the Motion in the name of Mr. Neil Kinnock relating to Income Tax may be proceeded with, though opposed, until half-past Eleven o'clock or until the end of a period of one and a half hours after it has been entered upon, whichever is the later—[Mr. Nicholas Baker.]

Question again proposed.

Mr. Lilley: The cost of the relief is simply the cost of tax forgone on capital gains made within the plans and on dividends paid into them. It is thus not a relief on the total amount of money put in. It only builds up over time. Often there will not be any gain that would have been taxed until the gain exceeds £5,000. In any case, most gains may not have been realised until later, so it is a long-term cost in terms of tax forgone. It builds up over time—hence the negligible figure.

Mr. Chris Smith: Am I right in thinking, therefore, that a cost is anticipated to the Exchequer in, say, three or four years but not in 12 months' time? If so, has the Treasury any idea of the likely cost?

Mr. Lilley: The hon. Gentleman is correct—the cost will build up in future. It may still be fairly small in the short time scale. I will let him know whether we have any estimates about how rapidly it will build up and whether I can give him any figures in our planning timetable.
The hon. Gentleman said that the relief has benefited larger investors, particularly those repackaging portfolios, and not the new investor. Last year the average amount committed to PEPs was only £3,000, whereas people could have invested £4,800 in a new plan or, because of a change in the regulations during the year, a total of £7,800. That suggests that the PEP is not just being used by people transferring a slug of a large existing portfolio each year into a plan to take advantage of the relief. Quite a few people are putting aside the amount that they can afford to save.
As for new investors, we have no direct information on what proportion of those taking out plans had not previously invested in equities. The hon. Gentleman referred to the survey by the Institute of Fiscal Studies, which suggested that one third of new plans were taken up by people who had had no equities before. If so, that is very encouraging news, especially as that would not include those who had privatised shares before. If we manage to increase by one third the total number of shareholders through the battery of measures that we are introducing, that will be a major achievement which will be

welcomed by my hon. Friends. We have already trebled the number of shareholders. A further increase would be a major gain.
The suggestion was made that PEPs get a bigger tax advantage than any other form of saving. That is not the case. The tax relief on PEPs is arithmetically equivalent to relief given on pensions. Indeed, the hon. Member for Berwick-upon-Tweed (Mr. Beith) proposed that, since the relief is no great advantage to those who have unused capital gains tax relief of £5,000, who are not making similar gains within PEPs, or who for other reasons are not getting a tax advantage, we should introduce front-ended relief.
I assure the hon. Member that front-ended relief, so long as one pays tax when one takes out money from a PEP, is arithmetically equivalent to relief given on PEPs but involves more regulatory problems because people try to use it as a tax avoidance device. Therefore, he would not achieve anything by going down that route that we do not achieve by the PEPs scheme. I think that that is the case —I am always hesitant at this time of night, and it took me a long time to convince a lot of people that that was true.
The hon. Member for Islington, South and Finsbury contrasted the present PEPs rules with those for friendly societies. I agree that we have uprated the special tax privilege for friendly societies by only 50 per cent., to £150, but we also introduced a Green Paper stating that friendly societies will be allowed to handle PEPs, so they will be able to take full advantage of PEP relief.

Mr. Chris Smith: The Financial Secretary referred to the Green Paper on friendly societies. He will recall that last year, when he was Economic Secretary to the Treasury, we pressed hard for an anticipated date for the proposals contained in the Green Paper to be brought before the House. Can he give us a date now?

Mr. Lilley: I regret that I cannot give a specific date, but we have made progress by issuing a Green Paper and the matter is moving in the direction that the hon. Gentleman would wish. The nods and winks that I gave then about the timing of such a procedure are still valid. My hon. Friend the Economic Secretary has fingertip control of the whole legislative procedure.
My predecessor was quoted as saying that it was only right that most of the PEPs relief should be available for investment in United Kingdom equities. The hon. Member for Islington, South and Finsbury criticised the reduction in the requirement for qualifying investment trusts from 75 per cent. to 50 per cent. In practice, investment trusts will have to maintain more than 50 per cent. on average to avoid falling below the amount when they make changes in their portfolios. Therefore, the requirement for investment to be mainly in United Kingdom equities will in effect be maintained, and the average will be above 50 per cent.
Investment trusts told us that they found it difficult to be sure of meeting the 75 per cent. limit which previously obtained. Most trusts are not tailored exclusively for PEPs. Therefore, they have to have portfolios with attractions for people who do not have PEPs. A number of trusts run saving schemes which are desirable and can be matched with PEPs—people put a regular amount of money into a PEP. It is desirable to harness an investment trust behind a PEP. Therefore, we thought it right on balance to make such changes.
The hon. Member for Berwick-upon-Tweed asked whether we were being sufficiently Euro-fanatical and whether we were meeting the Madrid criteria. That is a de minimis matter. The absolute bar and restrictions which operate in certain areas of the investment and savings industry on the continent constitute a more substantial restriction on the flow of funds. The noble Lord Joseph made the same point in his article, to which the hon. Member for Berwick-upon-Tweed referred.
I hope that I have covered most of the issues raised in the debate. I shall not detain the House longer at this late hour.

Mr. Bermingham: Like the beggar who comes to the club of professionals and asks the question to which he never gets an answer, I wonder whether the Financial Secretary will be kind enough to answer a simple question. Are he and the Government committed to retaining or to getting rid of capital gains tax?

Mr. Lilley: I apologise to the hon. Gentleman for not responding to the question that he elaborated in his speech. We have no current plans to get rid of capital gains tax. We reformed it in the 1988 Budget, aligning the capital gains tax rate with income tax. For the majority of people, that had the effect of reducing the capital gains tax rate that they faced—previously it was 30 per cent. and now it is 25 per cent. It may come as a surprise to hon. Members to learn that the majority of people in Britain pay tax at the basic rate—rather than at the higher rate, as most hon. Members do—but that is the case and the majority of those paying capital gains tax are basic rate payers, not higher rate payers. The higher rate payers pay large amounts of capital gains tax. The Treasury is happy to relieve them of those sums and has good use to put them to.

Question put and negatived.

DEFENCE

Ordered,
That Mr. Dick Douglas be discharged from the Defence Committee and Mr. John Home Robertson be added to the Committee.—[Mr. Ray Powell, on behalf of the Committee of Selection.]

ENVIRONMENT

Ordered,
That Mr. George Howarth be discharged from the Environment Committee and Dr. Kim Howells be added to the Committee. —[Mr. Ray Powell, on behalf of the Committee of Selection.]

Orders of the Day — North Tayside (Flooding)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kenneth Carlisle.]

Mr. Bill Walker: On Sunday night of 4 February and on Monday 5 February the River Tay burst its banks in a number of places and severe flooding occurred on a scale not previously experienced this century. That was hardly surprising because on 3 February the River Tay was already flowing at record levels—three times the normal February levels.
Following weeks of precipitation and with the ground saturation at record levels, the intense rainfall and the melting snow of 4 and 5 February produced a massive run-off of water from the catchments of the central and southern highlands, all of which went into loch and river systems which were already well above their normal levels for the time of year.
I remind my hon. Friend the Minister that the River Tay, the longest river, has a flow of water far greater than any other United Kingdom river. Evidence from the Tay river purification board shows that the River Tummel had a flow going through the Pitlochry dam which was the largest ever recorded. That flow reached its peak of 90 cumecs at 1.30 am on 5 February, the Hydro Board reported that about 75 per cent. of that flow originated in the River Garry catchment. The board has no control of flows in the River Garry.
On the River Tay at Grandtully the peak flow of 683 cumecs was reached at 3 am on 5 February. Below Logierait the combined rivers of the Tay, Tummel and Garry produced an immense volume of water—about 1,500-plus cumecs.
The railway line was subjected to all the force of that immense volume of water and, not surprisingly, the line was washed away, as was much of the top soil in the adjacent farms. At least five breaches occurred in that area and a huge washout hole was created.
Two tenanted farms are facing a bill of £32,000 just to clear the fields of sand and stone, and that does not include repairs to flood banks. At other farms and private dwellings in the area the damage to the flood banks and the environment was substantial.
It is essential that an independent hydraulic inquiry be set up, particularly to look into the main causes of the flooding and to get rid of some of the myths that have been circulating about who is to blame.
Afforestation and the Hydro Board are frequently given as the cause. Unless the truth is ascertained, those accusations—the myths—may just stick. In the area of the Dalguise railway viaduct, and downstream of Caputh, the damage calls for a report to define where future flood waters should go.
If the banks of the River Tay had not been breached in those and other areas, Perth city centre would have been flooded. The new flood warning scheme proposed by the Tay river purification board is to be welcomed, as is the Government's support for the scheme. However, warnings or not, the flood water must go somewhere, and only an in-depth hydraulic inquiry can produce viable proposals about where future flood waters should go. The people of Perthshire are looking to the Government to restore the environment and to provide sensible, viable solutions to the risks that a similar future flood may bring.
The Victoria bridge at Caputh was subjected to massive pressure when the river flow reached its peak of more than 1,700 cumecs at 7.15 am on Monday 5 February. My hon. Friend the Minister will be aware that I have a meeting arranged with him for Friday morning when I shall lead a delegation from the Tayside region to talk about the bridge.
In the area below Caputh, major breaches in the flood banks occurred. That was before the peak flow at about 3 am. A large area of land in the vicinity of Spittalfield, Meikleour, Kercock and Braecock was flooded to a considerable depth. A new river course was created in the area, and topsoil was washed away up to a depth of between 10 and 12 ft. Raspberry Fields vanished, and a new deep loch was created between Braecock and Meikleour. The village of Spittalfield was within inches of being completely flooded. The new loch probably saved Perth city centre from severe flooding. It delayed the peak measurement of 1,750 cumecs downstream at Ballathie. That was the greatest flow recorded at Ballathie since the station was opened in 1953.
Throughout the upper Tay system and down to Ballathie, the flood of 4 and 5 February 1990 surpassed any previously recorded in the gauging station's records. Expensive new bungalows at Little Dunkeld were flooded to a depth of 10 to 12 ft. Many old Victorian buildings were flooded for the first time. The police and emergency services performed magnificently. A pregnant woman was lifted by helicopter from the Delvine estate and taken to hospital; cattle were also airlifted out by helicopter. I was astonished that none of that was reported in the national news.
Many individuals and livestock were rescued by boat, and the Glenlyon road was washed away, as was the railway line north of Dunkeld, and the village of Dalguise was flooded. The Tay river purification board, the National Farmers Union and the Scottish Office all responded quickly and positively. A Scottish Office Minister—the noble Lord Sanderson—and I made an early visit to the area.
I wish to pay special thanks to the Tayside police, who did a magnificent job. However, sadly, the Tayside regional council, which is responsible for emergency planning and which was requested by Lord Sanderson to call a meeting to discuss the problem, has still not held the meeting, although more than two months have elapsed since the floods. In my view, because the floods and environmental damage were in rural Perthshire, the Labour administration of the Tayside region was not bothered, and is still not bothered. It is clear that it does not care. It would have been different had the floods been in Dundee, and of course it is just possible that they could have been in Dundee if they had not been in my constituency.
The standards and specifications laid down by the SDD for river flood bank repairs are unrealistic. The use of clay-based material for the repair of banks involves the transport of the clay from a long distance away as there is no local adequate source. Transport costs make that requirement unrealistic. The repair also has to be fully turfed and finally netted, all of which makes the cost of repair considerable. Consequently, many farmers and landowners have decided to replace their respective flood

banks in the former traditional manner which the Department used when much of the flooded farmland was in its ownership. Consequently, because the farmers and landowners are pursuing that course, the claims for grant aid will not be made. That is not satisfactory. It cannot be what my noble Friend the Minister of State envisaged or intended when he announced that he was instructing his officials to be flexible and helpful. That all makes nonsense of the Government's wish to be seen to be acting positively and sympathetically towards the victims of the flood.
As the Department has made no contact with Perth college and its advisers, John Dakers and Alex Taylor, who regularly give advice to farmers and landowners on such matters as flood banks, it appears that the Government's good intentions are being frustrated by their own officials, who made a very bad impression at the meeting called by the Perth National Farmers Union on 10 February in Birnam.
It is essential that the Government look urgently at means of restoring the environmental damage. It is right that we should restore damage created by man, whether by coal mines, old steel works or any other form of environmental damage. We should also restore environmental damage caused by nature. I hope that the Government will join me in pressing the EEC to allocate funds for that project and will be prepared to put up adequate funds to restore the badly damaged areas which will require huge quantities of top soil and adequate flood barriers.
I remind my hon. Friend that the banks are not looking kindly on requests for loans to restore the land to its original state. I shall let my hon. Friend have details of the likely cost of the environmental restoration.
I recommend that no new bailey bridge should be erected over the River Tay, for extracting pyrites or other purposes, until the independent hydrology report has been presented. Until we know what caused the flood and the damage, it would be unwise to erect any structure across the Tay. My hon. Friend will be aware that the Tay was washed away during the floods.
I also recommend that a single body be made responsible for flood prevention schemes throughout the river and that the Tayside region be instructed to act positively and constructively and be required to operate with Tay river purification board, which did such a splendid job. I recommend the chief executive and the chairman for the positive and responsible way in which they acted. The council should be instructed to co-operate with the Hydro Board, the NFU committee established to watch over the river and with British Rail, all of which have an interest in what has happened. An urgent review should be made of the demands being made by SDD officials before grants are awarded for river flood bank repairs.
This has been a serious and traumatic experience for many of my constituents, and we are grateful and thankful for the Government's positive and quick response. I hope that they will not now be frustrated by the actions of their own officials and by the inaction of Tayside regional council.

The Parliamentary Under-Secretary of State for Scotland (Lord James Douglas-Hamilton): I am glad to respond to my hon. Friend the Member for Tayside,


North (Mr. Walker) and I congratulate him warmly on having secured this debate on the Adjournment on behalf of his constituents.
I join my hon. Friend in paying tribute to the emergency services, which acted speedily. There was considerable damage. For example, the village of Spittalfield, being one of two main outflows from a large flood bank breach at Braecock farm, Caputh, appeared to be threatened by a cross-country torrent of flood water. After an emergency meeting of interested parties at Spittalfield on 7 February, Tayside roads department deposited a considerable amount of material at Braecock, which successfully diverted the Spittalfield flood flow into the other main flood channel.
I assure my hon. Friend that the Government have every sympathy for those affected by the flooding early in February. I know that rivers burst their channels with much force and quickly inundated large tracts of land. My hon. Friend knows that my colleagues and I have kept closely in touch with what is happening about the flooding in north Tayside and elsewhere. Not only have we had regular and frequent reports from our officials, but the Minister of State visited the worst affected areas in the immediate aftermath of the floods in the company of my hon. Friend to see the damage at first hand and to talk to councillors, farmers and local residents about the problems confronting them in restoring things to normal.
Scottish Office officials have been active in the area and have maintained contact with Tayside regional council, the National Farmers Union for Scotland and individual farmers. My hon. Friend has written on behalf of many of his constituents. From all those wide-ranging contacts, we have been kept well informed of the losses and damage suffered by the people in north Tayside, and by the farming community in particular.
Without doubt, the rainfall and river levels experienced in February and March were quite exceptional. The most important thing that can be done for farm land is to ensure that flood defences are restored to good order to prevent further damage. For that reason, the Scottish Office moved swiftly to make special assistance available for the repair of elevated farm flood banks. For a temporary period, grant rates are being increased to 75 per cent. in less favoured areas and 60 per cent. elsewhere, from the normal rates of 50 per cent. and 40 per cent. respectively. Those are the same arrangements as were made last year, which proved effective in securing comprehensive, good quality repairs. The prompt announcement of those special arrangements was widely welcomed. If taken up in full, the total amount of grant will be some £600,000 in Scotland; I announce that figure for the first time.
My hon. Friend will be interested to know that 29 applications from his constituency have been made for approval of proposed repair work to damaged flood banks. Engineering specifications have been provided by specialists in the Scottish Office in almost all those cases, enabling the farmers concerned to obtain estimates from the contractors.
There is also assistance for the non-agricultural sector. The scheme of financial assistance to local authorities—the Bellwin scheme—was triggered by my right hon. and learned Friend the Secretary of State on 8 February. It has been reviewed because of the abolition of domestic rates and their replacement by the community charge on 1 April. The main change is that the threshold above which grant will be paid is now expressed as a flat rate per

community charge payer, and in all cases this results in lower thresholds than before. The level of grant above the threshold is also increased from 75 per cent. to 85 per cent. Claims are still awaited from local authorities, which have until 31 July to make their applications. The Scottish Office has recently sent out a circular to local authorities which brings together the various sources of central Government funding available to offset expenditure arising from an emergency.
I am glad to confirm that the Scottish Office has endorsed proposals by the Tay river purification board to install a flood warning system and has adjusted the board's borrowing consent to permit the necessary expenditure to he incurred this year. I feel sure that the board will welcome that.
My hon. Friend has correctly focused on the need for a co-ordinated approach to water management problems in Tayside. It is true that the number of interests is large and, individually, their views may not always be compatible. My hon. Friend has called for a public inquiry. I entirely agree with him on the point of principle. We need to look beyond individual cases and beyond immediate questions of repair and restoration. If we thought that a public inquiry was the right way to look into those wider issues, we should hold one, but there is a mechanism to hand which we think is more appropriate.
Under the Flood Prevention (Scotland) Act 1961, Tayside regional council is the flood prevention authority for non-agricultural land. It also has powers under local government legislation to take measures to safeguard life and property and to incur expenditure where an emergency or disaster threatens or has occurred. Accordingly, my noble Friend the Minister of State suggested to Tayside regional council that it was best placed to invite parties to meet to identify the various viewpoints, to discuss how problems should be addressed and, no doubt, to form a working group. I am sure this is the correct way forward. It follows the pattern set in the Highland region following flooding last year, and I am confident that it will achieve my hon. Friend's objective.
The council has agreed to do this and has already said that an independent study by experts in hydrology—my hon. Friend called for such a study—should be commissioned to examine the feasibility of river management measures for flood alleviation. The council has asked for assistance towards the cost of such a study and my noble Friend the Minister of State will write to the council soon with an offer of a financial contribution up to a maximum of £10,000.
I should like to turn to some of the specific issues which have arisen. I am well aware that there was a quite prolonged period when wet ground and high river levels prevented heavy plant and machinery from gaining access to the floodbank breaches. Working conditions have improved dramatically in the past few weeks and I would urge farmers to press ahead with repairs and to take advantage of the enhanced grants. Other assistance is also available which would be of help to farmers suffering from the after-effects of the flood. Arterial drainage grants provide help with restoring eroded river banks or clearing blocked drainage ditches, and the European Community element of the farm and conservation grant scheme provides assistance towards replacing fences and the reseeding of grassland.
We have helped in a variety of other ways, too. Officials have been instructed to operate the grant schemes and


other schemes with the maximum flexibility that the rules will allow. Farmers who are already following fixed plans will be given greater freedom than is usual to change these so as to take account of flood damage. Farmers who wish to enter the set-aside scheme but who had missed the application deadline are being allowed to make late applications.
I well understand the anxiety of some farmers who think that the deadline of 31 August for floodbank claims is too tight and that the engineering specifications are too demanding. On the first of these, it is essential to establish the repairs so that they can resist erosion when high waters next return, which could be as soon as September with the Tay. As to the standards required, my hon. Friend must recognise that these must be closely related to the threat of attack by flood water, which will vary from place to place. It could jeopardise investment if standards were insufficient for the purpose. My hon. Friend will wish to note—I emphasise this point because he was concerned about it—that officials of the Scottish Office would be happy to discuss individual cases on their merits with farmers. The officials gave me that undertaking.
I am very much aware that floodbank grants of 75 per cent. or 60 per cent. still leave individuals to find the remainder. Since floodbank repairs are costly, some may find difficulty raising their share, but I cannot agree that the Government contribution should be raised to 100 per cent. as has been suggested. For the Government to do that would be to take over responsibility for protecting private property. Responsibility for agricultural land lies with riparian landowners, and it is right and proper that they should contribute on an individual basis. As I have already pointed out, the same arrangements were effective elsewhere last year and it would be most unfair to the other farmers to make a further exception now.
We have also looked at the costs of land restoration. They can be, as my hon. Friend knows from estimates that he has seen, nearly £40,000 per acre. Prime agricultural land in north Tayside is valued at about £1,000 per acre. Restoration at those prices would not be a good investment for a landowner, or the taxpayer, on cost-benefit grounds.
My hon. Friend referred to the damage to agricultural land and called for assistance, on environmental grounds, for its restoration. However, the latest reports that I have had suggest that even the worst-hit farms made a remarkable recovery in the favourable weather of April and early May. Cropping has resumed in all but isolated pockets on individual farms. I have to say that this is a tribute to the skill, hard work and dedication of the farmers who are my hon. Friend's constituents in the area. In some cases, the deposit of silt will actually provide a fertility bonus in the longer term.
However, in one or two cases, areas were totally scoured out, or cut off so dramatically that they can no longer serve any useful agricultural purpose. Some areas may have to be written off. Land restoration is excluded from the farm and conservation grant scheme. To qualify for the environmentally sensitive areas scheme, land must be within an area specially designated for the purpose. The seriously damaged cases in question are not in such a designated area. The Nature Conservancy Council and the

Countryside Commission for Scotland, which have small grant budgets in any case, could not apply their funds for the purpose of restoring agricultural production.

Mr. John Home Robertson: Will the Minister give way?

Lord James Douglas-Hamilton: No. I have a great deal to say in the two minutes that remain.
The Scottish Development Agency's arrangements for derelict land are for the purpose of recovery from industrial dereliction created by man. There are no powers, therefore, which would clearly apply for the purpose of restoring these areas of land.
The hope has been expressed that assistance might be obtained from EC funds. The provisions of EC regulation 4256/88, which governs assistance from the Community's agriculture funds to help areas recover agricultural production after a natural disaster, do not apply to north Tayside. It does not fall within the specially designated areas which qualify for such aid, which are Northern Ireland, the Highlands and Islands development board area and parts of Dumfries and Galloway. So assistance for Tayside from this source would not qualify under the agriculture fund. Nor can I hold out any hope of assistance from the funds made available to the United Kingdom as emergency aid. Those funds are entirely at the Commission's discretion and are given primarily as a humanitarian gesture.
I hope that my hon. Friend is ready to acknowledge that the Government have responded sympathetically to the difficulties of his constituents. We are making generous grants available for floodbank repairs with a public sector contribution which could run to more than £600,000 in Scotland, more than half of which would be available to farmers, in north Tayside in my hon. Friend's constituency. That is a reasonable offer to farmers, and I hope that they will take full advantage of it.
We shall also contribute up to £10,000 towards the cost of the independent study by consultant hydrologists, which Tayside regional council proposes to commission. We responded promptly and positively to the Tay river purification board's proposals for a flood warning system, and, of course, I have described the improvements in the Bellwin arrangements. All in all, I suggest to my hon. Friend, that the Government have taken rapid and measured action both to help deal with the immediate emergency and to have the longer-term issues properly
I congratulate my hon. Friend again most warmly on bringing this subject to the attention of the House. It has provided an opportunity to state clearly the terms of the circular sent out to local authorities on what is being done in Scotland. I shall read with utmost care what has been said and respond to him more fully if any details have not been covered in this brief debate. I thank him again.

Mr. Home Robertson: I am sorry that the Minister could not give way to me. I simply wish to associate the Opposition with the anxiety expressed by the hon. Member for Tayside, North (Mr. Walker) about the disaster that affected his constituency. I am a little disappointed by the Government's piecemeal approach, which the Minister outlined. There seems to be a case for some co-ordinating unit at the Scottish Office to help to draw together advice, practical assistance and financial support in order to overcome this type of natural disaster wherever it may strike. As I said, I am sorry that the


Minister could not give way to me. I simply wished to say that I shared the anxiety of the hon. Member for Tayside, North.

Lord James Douglas-Hamilton: I am glad to respond to the hon. Gentleman's point. I thank him for associating himself with the pleas of my hon. Friend the Member for Tayside, North. We believe that the way forward for Tayside regional council is to establish a working group. That suggestion has been made. It has worked well in the

Highland region. Often, things are not best organised in detail from the centre. The people on the spot who are responsible for the emergency services have to play a key role. My hon. Friend appreciates that and has paid tribute to those people. I thank him again for having given the House the opportunity to consider the matter today.

Question put and agreed to.

Adjourned accordingly at twenty minutes to Eleven o'clock.